Markets · 6 pages · 12 min
When the product is interchangeable, the producer with the lower cost survives a weak price that hurts higher-cost rivals.
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In a commodity market the product is interchangeable, so the market price is the same opportunity for every producer who meets the grade. The low-cost producer matters more because that shared price leaves a margin for those whose costs sit below it, and the lowest-cost producer still has a margin after higher-cost rivals have none. The opening covers one price for the grade, cost rank decides the margin, and high-cost capacity idles first.
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