Question

Suppose the equilibrium price of avocados is $2.00. If the actual price is above the equilibrium price, a

A. Shortage exists and the price falls to restore equilibrium.
B. Shortage exists and the price rises to restore equilibrium.
C. Surplus exists and the price falls to restore equilibrium.
D. Surplus exists and the price rises to restore equilibrium.
E. Surplus exists but nothing happens until either the demand or the supply changes.

Answer 1

C

Step-by-step explanation:

Equilibrium price is the price at which quantity demand equal quantity supplied.

Above equilibrium price there is a surplus - quantity supplied exceeds quantity demanded. This would lead to a fall in price until equilibrium is restored

Below equilibrium price there is a shortage - quantity demanded exceeds quantity supplied