When there are many producers of an identical product and you have perfect and free information about what every seller is charging, eventually every merchant will
A) raise the price of the product in hopes that you will purchase the product from them.
B) agree to charge a high price for the product so each will be able to earn high profits.
C) charge the same price for the product, and the price will be just enough to cover costs.
D) discontinue selling the product since there is so much competition.

Question

Quizplus · Accepted Answer

In a market with many producers of an identical product and perfect information, competition drives the price to a point where it just covers the costs of production. This is because any attempt to charge more would lead consumers to buy from a cheaper competitor, while charging less would not be sustainable for the producer.

When There Are Many Producers of an Identical Product and You