Assume the market depicted in the graph is in equilibrium. If the market goes from equilibrium to having its price set at $18:
A) the quantity exchanged will be 9,000.
B) all consumers will gain surplus.
C) the deadweight loss will be $2,250.
D) the quantity exchanged will be 4,000.

Question

Assume the market depicted in the graph is in equilibrium. If the market goes from equilibrium to having its price set at $18:
A) the quantity exchanged will be 9,000. 
B) all consumers will gain surplus. 
C) the deadweight loss will be $2,250. 
D) the quantity exchanged will be 4,000.

Quizplus · Accepted Answer

When the price is set at $18, the quantity demanded will decrease to 4,000 while the quantity supplied remains at 4,000. This creates a situation of excess supply, which leads to a decrease in price towards the equilibrium level. Therefore, the quantity exchanged will be 4,000. Choices A and B are incorrect because they assume that the market will continue to operate at the new price of $18, which is not the case. Choice C is incorrect because deadweight loss occurs when markets operate at a quantity different from the equilibrium level, but this is only a temporary situation as the market will eventually adjust back to equilibrium.

Assume the Market Depicted in the Graph Is in Equilibrium