Question

which situation is the best example of competition in an economic system?
a restaurant just opened down the block from a movie theater, and the restaurant owner hopes to attract diners after each movie.
a small cd store slashed its prices to attract customers from a larger store that sells cds and dvds.
a store that sells sneakers has offered a special deal to customers from a nearby health club.
a federal agency has been created to monitor the production and distribution of food supplements.

Explanation:

Competition in an economic system occurs when businesses vie for the same customers. In option B, both the small CD store and the larger store (which sells CDs) are in the same product category (CDs). By slashing prices, the small store is directly competing for customers who might otherwise go to the larger store.

• Option A: A restaurant and a movie theater are in different industries (food service vs. entertainment), so it's not direct competition.
• Option C: A sneaker store and a health club are in different industries (footwear vs. fitness), so no competition.
• Option D: A federal agency monitoring food supplements is a regulatory function, not competition.

Answer:

B. A small CD store slashed its prices to attract customers from a larger store that sells CDs and DVDs.