Which of the following best describes market equilibrium?

• A. It is the point where government sets the price of a good.
• B. It is the point where the quantity demanded equals the quantity supplied.
• C. It is the price at which only producers are willing to sell.
• D. It is the situation where demand exceeds supply at all prices.

Answer: (B)

Verified step by step guidance

1. Understand the concept of market equilibrium: it occurs when the quantity of a good that consumers want to buy (quantity demanded) equals the quantity that producers want to sell (quantity supplied).
2. Recall that market equilibrium is not determined by government intervention, so the price is not set by the government but by the interaction of supply and demand.
3. Recognize that at equilibrium, there is no excess supply or excess demand, meaning neither producers nor consumers have an incentive to change the price.
4. Identify that the equilibrium price is the price at which the market clears, meaning all goods produced are sold and all consumer demand is satisfied.
5. Conclude that the best description of market equilibrium is the point where quantity demanded equals quantity supplied.