Refer to the figure. If the equilibrium price is 40, which of the following statements is correct?

• A. There will be a surplus in the market at a price of 40.
• B. Quantity demanded equals quantity supplied at a price of 40.
• C. There will be a shortage in the market at a price of 40.
• D. The market is not in equilibrium at a price of 40.

Answer: (B)

Verified step by step guidance

1. Understand the concept of market equilibrium: it occurs when quantity demanded equals quantity supplied at a certain price.
2. Identify the equilibrium price given in the problem, which is 40.
3. At the equilibrium price, check the quantities demanded and supplied on the graph or figure to confirm they are equal.
4. Recall that if the price is above equilibrium, quantity supplied exceeds quantity demanded, causing a surplus; if below, quantity demanded exceeds quantity supplied, causing a shortage.
5. Since the price is at equilibrium (40), conclude that quantity demanded equals quantity supplied, meaning the market is in equilibrium with no surplus or shortage.