In a perfectly competitive market, if supply and demand fully reflect all of the costs and benefits associated with production and consumption, then total economic surplus is maximized when:
A)price controls keep prices low enough that most consumers can purchase the item.
B)consumer surplus and producer surplus are equal.
C)consumer surplus is greater than producer surplus.
D)the market is in equilibrium.

Question

Quizplus · Accepted Answer

When the market is in equilibrium, buyers and sellers cannot design any mutually beneficial transactions. Thus, as long as supply and demand capture all of the relevant costs and benefits of production and consumption, total economic surplus will be maximized when the market is in equilibrium.

In a Perfectly Competitive Market, If Supply and Demand Fully