Which of the following statements about competition in a market is true?
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 drives firms to produce and sell products until the cost of production equals the price received, forcing firms to produce at the lowest possible cost to keep the price low. Therefore, firms have to produce when the marginal benefit to consumers exceeds the marginal cost of production. In a competitive market, firms have minimal pricing power and cannot add only low profit margins to their costs of production. The cost of producing a product should equal the selling price in a competitive market, and pricing your product arbitrarily will soon drive customers to your competitors.

Which of the Following Statements About Competition in a Market