-Refer to Figure 4 -5. The figure above represents the market for iced tea. Assume that this is a competitive market. If the price of iced tea is US$3, what changes in the market would result in an economically efficient output?
A) The quantity supplied would decrease, the quantity demanded would increase, and the equilibrium price would decrease.
B) The price would decrease, quantity demanded would increase, and quantity supplied would decrease.
C) The price would decrease, the quantity supplied would increase, and the quantity demanded would decrease.
D) The price would decrease, the demand would increase, and the supply would decrease.

Question

-Refer to Figure 4 -5. The figure above represents the market for iced tea. Assume that this is a competitive market. If the price of iced tea is US$3, what changes in the market would result in an economically efficient output?
A) The quantity supplied would decrease, the quantity demanded would increase, and the equilibrium price would decrease. 
B) The price would decrease, quantity demanded would increase, and quantity supplied would decrease. 
C) The price would decrease, the quantity supplied would increase, and the quantity demanded would decrease. 
D) The price would decrease, the demand would increase, and the supply would decrease.

Quizplus · Accepted Answer

At a price above equilibrium, there is a surplus of goods, leading to a decrease in price. This decrease in price causes the quantity demanded to increase and the quantity supplied to decrease until equilibrium is reached, making option B correct.