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In a competitive market the equilibrium price is determined: Question options: at the intersection of the firm's demand and the market supply curves
In a competitive market the equilibrium price is determined:
Question options:
at the intersection of the firm's demand and the market supply curves.
at the intersection of the market demand and supply curves.
at the intersection of the firm's demand and marginal cost curves.
so as to cover the costs of the potential firms.
so as to cover the costs of the firms currently in the industry.
Expert Solution
Answer
So, the correct option is 1st "at the intersection of the firm's demand and the market supply curves."
Explanation
In a competitive market, the equilibrium price is determined at the intersection of the market demand and supply curves. In a perfectly competitive market the firms have competition amongst them where the prices, demand and supply is governed by the consumer. Hence the place where the demand intersects the supply will represent the equilibrium price where all the firms in the exiting competition if sell their product will earn no profit or incur no losses.
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