Which of the following statements is true about competition in a market?
A) Competition forces firms to outsource the production of their labor-intensive products.
B) Competition forces firms to undercut their selling price, thus benefiting consumers who will be able to purchase products at the lowest price possible.
C) Competition forces firms to produce and sell products as long as the marginal benefit to consumers exceeds the marginal cost of production.
D) Competition forces firms to add only low profit margins to their costs of production.

Question

Quizplus · Accepted Answer

Competition in a market forces firms to produce and sell products as long as the marginal benefit to consumers exceeds the marginal cost of production. This is because if a firm is not able to produce and sell products at a cost that is lower than the amount consumers are willing to pay for it, other firms will enter the market and compete by producing and selling the same product at a lower cost. As a result, firms are forced to operate at the most efficient level of production in order to stay competitive. Outsourcing, adding low profit margins, and undercutting prices may be strategies used by firms in a competitive market, but they are not necessarily true for all markets.

Which of the Following Statements Is True About Competition in a Market