Market Equilibrium — Practice Quiz

Increase in consumer income (for normal goods), Increase in population, Favorable change in consumer preferences

A rightward shift in demand means consumers want more of the good at every price level. This happens when income increases (for normal goods), population grows, or preferences favor the good. Decrease in substitute prices and increase in input costs don't directly shift demand rightward.

Minimum average cost

With free entry and exit, firms enter when there are supernormal profits and exit when there are losses. In equilibrium, price equals minimum average cost, ensuring firms earn only normal profit with no incentive to enter or exit.

Market supply is greater than market demand at that price, Some firms are unable to sell the quantity they want to sell, It creates a tendency for firms to lower their price

Excess supply means that at a given price, the quantity firms want to sell is greater than the quantity consumers want to buy. In that situation, some firms cannot sell all they planned to sell, so they tend to reduce price. The statement about consumers willing to pay more and prices rising describes excess demand, not excess supply.

A maximum price set by the government

A price ceiling is an upper limit on price imposed by the government. It is typically set below the equilibrium price to make essential goods affordable for consumers, but it can create shortages.