Which consumers are able to purchase a product in a competitive market, and why?

• A. Consumers whose willingness to pay is less than the market price, because they can negotiate for a lower price.
• B. Consumers whose willingness to pay is greater than or equal to the market price, because they value the product at least as much as its cost.
• C. Only consumers with the highest income, because price is determined solely by income.
• D. All consumers, regardless of their willingness to pay, because the product is available to everyone.

Answer: (B)

Verified step by step guidance

1. Step 1: Understand the concept of willingness to pay (WTP), which represents the maximum amount a consumer is ready to pay for a product based on the value they place on it.
2. Step 2: Recognize that in a competitive market, the market price is determined by the intersection of supply and demand and is the same for all consumers.
3. Step 3: Identify that consumers will only purchase the product if their willingness to pay is at least equal to the market price, meaning they value the product as much as or more than the cost they must pay.
4. Step 4: Note that consumers whose willingness to pay is less than the market price will not buy the product because it costs more than the value they assign to it.
5. Step 5: Conclude that only consumers with willingness to pay greater than or equal to the market price are able to purchase the product, as they gain non-negative consumer surplus from the transaction.