Varying Prices to Achieve Daily Market Equilibrium

Steps:

• Examine each demand curve (D1, D2, D3) intersecting the fixed supply curve to find equilibrium points.
• Identify equilibrium prices: lowest at P1 (D1), mid at P2 (D2), highest at P3 (D3).
• To allocate spaces via market mechanism, set price at each day's equilibrium to balance supply and demand.
• Conclude policy requires adjusting price daily across P1 to P3 range.

Why D is correct:

• Market mechanism requires price equaling equilibrium (where supply meets demand) for efficient allocation without shortages or surpluses.

Why the others are wrong:

• A: Fixed P1 causes shortages on D2/D3 days as demand exceeds supply.
• B: Price between P1-P2 underprices D3, creating shortages.
• C: Varying only P1-P2 ignores D3's higher equilibrium, leading to inefficiency.

Final answer: D