In a competitive market, the equilibrium price is the price at which:

• A. supply exceeds demand
• B. quantity demanded equals quantity supplied
• C. demand exceeds supply
• D. producers maximize their profits

Answer: (B)

Verified step by step guidance

1. Understand the concept of market equilibrium: it is the point where the quantity of a good or service demanded by consumers equals the quantity supplied by producers.
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. Recognize that at equilibrium price, there is no shortage or surplus because the amount consumers want to buy exactly matches the amount producers want to sell.
4. Analyze the options: if supply exceeds demand, there is a surplus; if demand exceeds supply, there is a shortage; producers maximizing profits is related but not the definition of equilibrium price.
5. Conclude that the equilibrium price is defined by the condition where quantity demanded equals quantity supplied.