If a market is in equilibrium, then we know that price equals marginal cost because
A)the market demand curve reflects marginal cost.
B)marginal cost never changes.
C)the market supply curve reflects marginal cost.
D)every firm has the same costs.
E)firms are required by law to equate marginal cost to price.

Question

Quizplus · Accepted Answer

In a market in equilibrium, the quantity demanded and supplied are equal, which means the market supply curve intersects with the market demand curve. Since the market supply curve reflects the marginal cost of production for the firms in the market, and the market demand curve reflects the marginal willingness to pay of the buyers, the equilibrium price must be such that it equates the two curves. Therefore, in an equilibrium market, price equals marginal cost as reflected in the market supply curve.

If a Market Is in Equilibrium, Then We Know That