Final answer:
Business must contend with competition, which can lead to loss of profits or complete market exit. In a monopolistic market, firms that enjoy economic profits can expect new competitors to enter the scene. Hiring and promotion are also based on economic factors rather than discrimination in competitive markets, ensuring productivity and diversity increase profits.
Step-by-step explanation:
The concept of competition in business underscores that firms must continually evolve to maintain or improve their market position. If a company encounters competition from other firms offering better or cheaper products, it could see a significant reduction in its profits, or worse, be driven out of business. For employees, this could mean a loss of income or jobs. Furthermore, in markets with monopolistic competition, the entry of new firms into a profitable market is a common occurrence. Businesses must be vigilant, especially if they have unique selling propositions such as a popular barbecue sauce or a highly regarded laundry detergent, because competitors can and will try to imitate or improve upon these offerings to capture a share of the market.
When considering the hiring and promotion aspect, profit-driven businesses will likely base decisions on economic factors, favoring productivity over discriminatory practices. In highly competitive markets, businesses that refuse to sell to or hire certain demographics, such as minorities or women, solely due to prejudice, may inadvertently harm their bottom line. Profit-seeking employers ready to embrace diversity can benefit by tapping into a wider customer base and potentially more productive employees. The incentive to maximize profits typically aligns business decisions with market demands and away from personal biases.