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    Question

    In a perfectly competitive market, which of the following conditions must hold for the market to be in equilibrium?

    A Quantity demanded equals quantity supplied, and there is no tendency for price to change. Correct Answer Incorrect Answer
    B Firms are earning economic profits, incentivizing new firms to enter the market. Correct Answer Incorrect Answer
    C There is excess demand, leading to upward pressure on prices. Correct Answer Incorrect Answer
    D There is excess supply, leading to downward pressure on prices. Correct Answer Incorrect Answer
    E The government sets the price at a level that ensures all goods are sold. Correct Answer Incorrect Answer

    Solution

    Market equilibrium in a perfectly competitive market occurs when the quantity demanded by consumers equals the quantity supplied by producers at the prevailing market price. At this point, there is no excess demand or supply, and there is no pressure for the price to change.

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