MC and MU are set equal to one another in a market economy because
A)producers and consumers are free to communicate with one another.
B)producers and consumers both respond to the same price.
C)consumers must accept the prices set by producers.
D)producers must accept the price set by consumers.

Question

Quizplus · Accepted Answer

In a market economy, prices are determined by the interaction of supply and demand. In equilibrium, the price is such that MC (marginal cost) equals MU (marginal utility). This is because at the equilibrium price, producers are willing to supply exactly the amount that consumers are willing to buy. Therefore, both producers and consumers respond to the same price, which is determined by the intersection of the supply and demand curves.

MC and MU Are Set Equal to One Another in a Market