📚 Learning Guide
Market Structures in Economics
easy

Arrange the following steps for achieving market equilibrium in a perfectly competitive market: A) Firms enter the market until profits are zero, B) The interaction of supply and demand determines the market price, C) Producers supply goods at the equilibrium price, D) Consumers demand goods at the equilibrium price.

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Learning Path

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Choose the Best Answer

A

B → D → C → A

B

D → C → A → B

C

A → B → D → C

D

C → A → B → D

Understanding the Answer

Let's break down why this is correct

Answer

In a perfectly competitive market, achieving market equilibrium starts with the interaction of supply and demand determining the market price. Once the price is set, consumers demand goods at this equilibrium price, which means they are willing to buy the amount that is available. At the same time, producers supply goods at this price, wanting to sell as much as they can. As firms realize profits, new firms enter the market, increasing supply until profits are driven down to zero. This process ensures that the market reaches a balance where the quantity supplied equals the quantity demanded, stabilizing the market.

Detailed Explanation

First, supply and demand set the market price. Other options are incorrect because This order suggests consumers buy before producers supply; This option implies firms enter the market before knowing the price.

Key Concepts

Market Equilibrium
Perfectly Competitive Market
Supply and Demand
Topic

Market Structures in Economics

Difficulty

easy level question

Cognitive Level

understand

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