Question

Which of the following would come closest to describing competition, given Schumpeter's view of competition?

a Firm A lowers its price because firm B has lowered its prices.
b Firm A comes up with a product to sell that ends up causing firm B to go out of business.
c Firms A and B agree to raise the prices of their goods that they sell to the public.
d Firm A raises its price because firm B has lowered its price.

Answer 1

According to Schumpeter's view of competition, the option that best describes competition is Option B, where Firm A introduces a product that causes Firm B to go out of business.

Step-by-step explanation:

Given Schumpeter's view of competition, the option that comes closest to describing competition is Option B.

In Schumpeter's view, competition is a dynamic process where firms innovate and introduce new products or technologies that disrupt the existing market. This innovation can lead to the decline or even failure of competing firms.

In the given option, Firm A comes up with a new product that causes Firm B to go out of business. This scenario exemplifies Schumpeter's idea of competition where innovation and disruption play a key role.

It is important to note that Schumpeter's view of competition focuses on the impact of innovation and creative destruction, rather than simply price changes or agreements between firms.