The market clearing price is
A) the price which eliminates excess quantity supplied or excess quantity demanded.
B) the price which leaves an excess quantity demanded.
C) the price which leaves an excess quantity supplied.
D) the lowest price at which a positive quantity supplied exists.

Question

Quizplus · Accepted Answer

The market clearing price is the price at which quantity supplied is equal to quantity demanded, which eliminates any excess of either supply or demand. Therefore, option A is the correct choice. Option B is incorrect because an excess quantity demanded would result in a shortage and the market would not clear. Option C is also incorrect because an excess quantity supplied would result in unsold goods and the market would not clear. Option D is incorrect because a positive quantity supplied can exist at any price level higher than the marginal cost of production.

The Market Clearing Price Is