A Level Economics AQA Practice Exam

What is non-price competition?

1. A method of competing by lowering prices

2. A strategy to differentiate products through other means than price

3. A practice that leads to market monopolies

4. A strategy only used in oligopolistic markets

The correct answer is: A strategy to differentiate products through other means than price

Non-price competition refers to a strategy where firms focus on differentiating their products or services from those of their competitors without altering the price. This can be achieved through various means such as improving quality, enhancing customer service, branding, advertising, or introducing innovative features. By doing so, businesses aim to create a competitive advantage that attracts customers based on factors other than price, like perceived value or brand loyalty. The other options highlight different aspects of market competition but do not accurately describe non-price competition. Lowering prices relates directly to price competition, which contradicts the essence of non-price competition. The notion that it leads to market monopolies is not inherently tied to non-price strategies; these strategies can exist within various market structures including perfectly competitive and monopolistic markets. Lastly, while non-price competition can be observed in oligopolistic markets where firms compete intensely without changing prices, it is not restricted to those markets alone, making that statement incomplete.