In which of the following would equilibrium prices be higher than marginal cost?

A) when the market supply curve is inelastic

B) when the firm has no fixed costs

C) when the firm specific demand curve

D) when several perfect substitutes are available

• The correct answer is (C); when the firm has a specific demand curve.

The cost incurred in the production of an extra unit of a product or service is termed as the marginal cost. The equilibrium prices tend to be higher than the marginal cost when the demand curve is specific. This is because when the demand curve is defined, then the supply of a given product or service in the market will also be defined as the consumers in the market are willing to acquire the given products or prices at the quoted prices, as much as the equilibrium prices go high, then the marginal cost of production would not exceed the equilibrium prices due to the demand in the market.