Refer to the diagram. A price of \$60 in this market will result in:

• A. no change in the market, because price has no effect on supply or demand
• B. market equilibrium, because quantity supplied equals quantity demanded at \$60
• C. a surplus, because quantity supplied exceeds quantity demanded at \$60
• D. a shortage, because quantity demanded exceeds quantity supplied at \$60

Answer: (C)

Verified step by step guidance

1. Identify the meaning of market equilibrium: it occurs when quantity demanded equals quantity supplied at a given price.
2. Understand what happens when the price is above the equilibrium price: typically, quantity supplied exceeds quantity demanded, leading to a surplus.
3. Understand what happens when the price is below the equilibrium price: typically, quantity demanded exceeds quantity supplied, leading to a shortage.
4. Examine the given price of \$60 in the diagram and compare the quantity supplied and quantity demanded at this price point.
5. Determine whether quantity supplied is greater than, less than, or equal to quantity demanded at \$60 to conclude if there is a surplus, shortage, or equilibrium.