The correct answer is: A. P = 6 and Q = 9
The market demand curve for a perfectly competitive industry is QD = 12 – 2P; the market supply curve is QS = 3 + P. The market will be in equilibrium when the quantity demanded equals the quantity supplied. This occurs when P = 6 and Q = 9.
To see this, let’s graph the demand and supply curves. The demand curve is downward-sloping, while the supply curve is upward-sloping. The equilibrium point is where the two curves intersect. In this case, the equilibrium point is at P = 6 and Q = 9.
Here is a graph of the demand and supply curves:
As you can see, the equilibrium price is $6 and the equilibrium quantity is 9. This is the price and quantity that will be established in the market if there is no government intervention.
Here is a brief explanation of each option:
- Option A: P = 6 and Q = 9. This is the correct answer. The market will be in equilibrium when P = 6 and Q = 9.
- Option B: P = 5 and Q = 2. This is not the correct answer. The market will not be in equilibrium at P = 5 and Q = 2. At this price, the quantity demanded is 12, while the quantity supplied is only 2. This means that there is a shortage of 10 units. The price will therefore rise until the quantity demanded equals the quantity supplied.
- Option C: P = 4 and Q = 4. This is not the correct answer. The market will not be in equilibrium at P = 4 and Q = 4. At this price, the quantity demanded is 8, while the quantity supplied is 12. This means that there is a surplus of 4 units. The price will therefore fall until the quantity demanded equals the quantity supplied.
- Option D: P = 3 and Q = 6. This is not the correct answer. The market will not be in equilibrium at P = 3 and Q = 6. At this price, the quantity demanded is 10, while the quantity supplied is only 6. This means that there is a shortage of 4 units. The price will therefore rise until the quantity demanded equals the quantity supplied.