The competitive market price of a good
A) is equal to the value consumers place on the last unit they purchased.
B) must reflect both the value to consumers and cost to producers.
C) must exceed the cost of producing an extra unit of the good.
D) must be less than what consumers are willing to pay for an additional unit of the good.

Question

Quizplus · Accepted Answer

In a competitive market, the price of a good is determined by the forces of supply and demand. The price must reflect both the value that consumers place on the good and the cost of producing it for producers to make a profit. If the price is too high, consumers may not be willing to pay it, resulting in a surplus of the product. If the price is too low, producers may not be able to cover their costs, resulting in a shortage of the product. Therefore, the competitive market price of a good must balance the interests of both consumers and producers.

The Competitive Market Price of a Good