In the price-setting process within competitive markets, after demand has been evaluated, the next step is to:

• A. Set prices above the equilibrium to maximize profits
• B. Ignore supply and focus solely on consumer preferences
• C. Analyze the supply conditions to determine market equilibrium
• D. Implement government price controls

Answer: (C)

Verified step by step guidance

1. Understand that in a competitive market, the price-setting process involves both demand and supply factors to reach equilibrium.
2. After evaluating demand, the next logical step is to analyze the supply conditions, because supply determines how much producers are willing to sell at different prices.
3. Use the supply function or supply schedule to see how quantity supplied changes with price, which complements the demand analysis.
4. Find the market equilibrium by identifying the price at which quantity demanded equals quantity supplied, ensuring no excess demand or supply.
5. Recognize that setting prices above equilibrium or ignoring supply leads to inefficiencies, and government price controls are external interventions, not part of the natural price-setting process.