It would in a properly free market. But late stage capitalism's goal is monopolization, because it maximises profit. Or to quote Marx: "Monopoly is the inevitable end of competition, which engenders it by a continual negation of itself."

And this is exactly what Steinbeck is describing here: "you buy food from us, at our prices, or nothing at all. We'd rather destroy our product than to sell lower." And they can do this because no one has access to the products, or the means of production (e. g. the land to grow produce).

And this is where we are today with Amazon, Nestle, Walmart and so on. They don't have any real competition anymore.