Question

which of the following statements about competition in a market is true? a. competition forces firms to undercut their selling price, thus benefiting consumers who will be able to purchase products at the lowest price possible. b. competition forces firms to add only low profit margins to their costs of production. 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 outsource the production of their labor - intensive products.

Explanation:

In a competitive market, firms aim to maximize profit. They will produce and sell as long as the marginal benefit to consumers (which is related to the price consumers are willing to pay) exceeds the marginal cost of production. Option A is not always true as firms may not always be able to undercut to the lowest - possible price due to costs. Option B is too simplistic as profit - margin decisions are more complex. Option D is not a general result of competition in all cases.

Answer:

C. Competition forces firms to produce and sell products as long as the marginal benefit to consumers exceeds the marginal cost of production.