Which of the following statements is true about competition in a market?
A)Competition forces firms to outsource the production of their labour-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 in a market forces firms to produce and sell products as long as the marginal benefit to consumers exceeds the marginal cost of production. This is because firms in a competitive market have no power to influence the price of the product and must therefore focus on minimizing their costs while providing maximum consumer satisfaction. Outcompeting competitors will only be possible if the marginal benefit of a firm's product exceeds the marginal cost of production. Therefore, firms cannot add only low profit margins to their costs of production since they must focus on achieving the best possible balance between costs and benefits. Outsourcing the production of labor-intensive products is not a necessary consequence of competition, nor is undercutting the selling price always the best strategy for firms.

Which of the Following Statements Is True About Competition in a Market