I am also a writer and have seen these weird pricings when looking for available projects. As someone mentioned above, due to the high competitiveness in the early stages of one’s career on Fiverr, some may opt to offer their services at extremely low prices. Unfortunately, this is sometimes necessary.
But as far as I can tell, once you show you are a great seller and do your best in your jobs, your reviews start to shine for your visitors and some are even willing to pay two to five times the amount they were initially expecting to pay. I even had a client who, after I gave them the final quote, decided to pay $15 more because they thought I was charging too low - how I wish this happened with other buyers as well.
I believe this $1 per article is just because people must get started somehow. Though most of us would never write more than 100 words at those rates, some may be willing to. It happens, but I highly doubt this affects negatively the work of other sellers.
These are different target audiences. Those who want a cheap service usually don’t care about reputation and look for new sellers, whereas those who need more detailed work look for Level 1, 2 and TRS. This is what I feel, at least. They don’t mix and will never mix, so one is not “stealing” customers from the other.