In the context of the fundamental principles of a free market system, which of the following statements is true of the equilibrium price?
A)Market prices adjust toward the point where the supply curve and the demand curve intersect.
B)The break-even point denotes the profit margin that a seller makes over the cost price of a product.
C)It is the point at which the final cost of production equals the price of the raw materials used for a product.
D)It refers to a situation where the cost price of a product is equal to its selling price.

Question

Quizplus · Accepted Answer

The equilibrium price is the price point where the supply of a product or service matches the demand of buyers. In a free market system, market prices adjust toward the point where the supply curve and the demand curve intersect. Therefore, option A is the correct statement. Option B refers to the break-even point, which is not the same as the equilibrium price. Option C refers to variable costs, whereas the equilibrium price is related to supply and demand dynamics. Option D is also incorrect because if the cost price is equal to the selling price, there would be no profit, and therefore no equilibrium price.

In the Context of the Fundamental Principles of a Free