At what price will a stock reach 'equilibrium' in the market, meaning it is perceived as fairly priced today?

• A. At the price where demand exceeds supply
• B. At the price set by the government
• C. At the price where quantity demanded equals quantity supplied
• D. At the price where supply exceeds demand

Answer: (C)

Verified step by step guidance

1. Understand the concept of market equilibrium: it occurs at the price where the quantity demanded by buyers equals the quantity supplied by sellers.
2. Recall the law of demand, which states that as price decreases, quantity demanded increases, and the law of supply, which states that as price increases, quantity supplied increases.
3. Set up the equilibrium condition mathematically as \(\text{Quantity Demanded} = \text{Quantity Supplied}\).
4. Recognize that at this equilibrium price, there is no shortage or surplus in the market, meaning the market clears efficiently.
5. Conclude that the stock reaches equilibrium at the price where quantity demanded equals quantity supplied, not where demand exceeds supply, supply exceeds demand, or where the government sets the price.