Final answer:
Competition harms businesses by reducing their market share (option b), possibly leading to reduced profits and job losses. However, competition also fosters innovation and long-term economic benefits. Overall, a dynamic economy with competition offers more advantages than disadvantages for a nation.
Step-by-step explanation:
Competition, whether domestic or foreign, can harm businesses in several ways. The correct answer to the student's question is: b. Competition harms businesses by reducing their market share. When other firms offer better or cheaper products, a business's profits can be reduced, which may lead to it being driven out of the market. This can result in job losses and decreased income for workers within those businesses. While competition does indeed encourage innovation and can lead to long-term benefits for consumers and the economy as a whole, the immediate effect on the specific competing businesses can be detrimental.
It is important to recognize that while competition can create challenges for businesses, it is also conducive to a dynamic economy. International trade and competition can prevent stronger protectionist measures due to international agreements, and the overall effect is that consumers get better or less expensive products, while businesses with competitive offerings could see an increase in profits. The disruption caused by competition can be likened to disruptions caused by new technologies; while they may cause immediate challenges, they often bring economic benefits.
In conclusion, although competition poses a threat to individual businesses by affecting their market share and profitability, when taken in a broader context, it usually brings more benefits than harm to a nation's economy.