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Question

What does equilibrium price indicate?
  1. Price determined by demand and supply
  2. Price determined by cost and profit
  3. Price determined by cost of production
  4. Price determined to maximise profit

A
Price determined by demand and supply
B
Price determined by cost of production
C
Price determined to maximise profit
D
Price determined by cost and profit
Solution
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When supply and demand are equal the market clears, the price at which this happens is known as the market clearing price or the equilibrium price.
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