Figure: Efficient Market Outcome (Figure: Efficient Market Outcome) Refer to the figure. Theefficient price and quantity are, respectively: A)P₁ and Q₁. B)P₁ and Q₂. C)P₂ and Q₁. D)P₃ and Q₂.

Question

Quizplus · Accepted Answer

In an efficient market, the price and quantity will reach equilibrium where the supply curve intersects with the demand curve. In the figure, this occurs at point U1 where both curves intersect. At this point, the efficient price (PS1) is determined by the demand and supply at this equilibrium point and the efficient quantity (QS1) is also determined by the supply and demand at this equilibrium point. Therefore, the correct answer is P₂ and Q₁, which is only found in option C.