In competitive market equilibrium, social welfare is measured by the:
A) difference of net benefits derived by consumers and producers.
B) sum of net benefits derived by consumers and producers.
C) benefits derived by consumers.
D) benefits derived by producers.

Question

Quizplus · Accepted Answer

In competitive market equilibrium, the social welfare is maximized when the sum of net benefits derived by consumers and producers is highest. This is because in a competitive market, the price and quantity are determined by the interaction of demand and supply forces, and this equilibrium leads to the efficient allocation of resources where the marginal benefit of the last unit produced equals the marginal cost of production. Thus, the total surplus, which is the difference between the total benefits and total costs, is maximized, and this results in the highest social welfare.

In Competitive Market Equilibrium, Social Welfare Is Measured by The