Multiple Choice
What is the likely effect on market equilibrium when sellers exit a market in which the average seller is experiencing losses?
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3. The Market Forces of Supply and Demand
Market Equilibrium
Multiple Choice
Which of the following statements is correct about the market for Red Delicious apples at equilibrium?
A
At equilibrium, there is always a surplus of Red Delicious apples.
B
Producers can sell unlimited quantities of Red Delicious apples at the equilibrium price.
C
The quantity of Red Delicious apples demanded equals the quantity supplied.
D
The price of Red Delicious apples is determined solely by consumer preferences.
Verified step by step guidance1
Understand the concept of market equilibrium: It occurs where the quantity demanded by consumers equals the quantity supplied by producers.
Analyze the first statement: 'At equilibrium, there is always a surplus of Red Delicious apples.' Recall that a surplus happens when quantity supplied exceeds quantity demanded, which contradicts the definition of equilibrium.
Consider the second statement: 'Producers can sell unlimited quantities of Red Delicious apples at the equilibrium price.' At equilibrium, the quantity sold is limited to the equilibrium quantity, so producers cannot sell unlimited amounts.
Evaluate the third statement: 'The quantity of Red Delicious apples demanded equals the quantity supplied.' This matches the definition of market equilibrium, where supply equals demand.
Review the fourth statement: 'The price of Red Delicious apples is determined solely by consumer preferences.' Prices are influenced by both supply and demand factors, including producer costs and consumer preferences, so this statement is incomplete.
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