In general, if a benevolent social planner wanted to maximize the total benefits received by buyers and sellers in a market, the planner should
A) choose a price below the market equilibrium price.
B) allow the market to seek equilibrium on its own.
C) choose any price the planner wants because the losses to the sellers (buyers) from any change in price are exactly offset by the gains to the buyers (sellers).
D) choose a price above the market equilibrium price.

Question

Quizplus · Accepted Answer

Allowing the market to seek equilibrium on its own is the best option for a benevolent social planner to maximize the total benefits received by buyers and sellers in a market. This is because at equilibrium, the quantity supplied and quantity demanded are equal, resulting in both buyers and sellers receiving the maximum possible benefits. Any other intervention by the planner, such as setting a price above or below equilibrium, would result in a reduction in total benefits received by one group of participants in the market.

In General, If a Benevolent Social Planner Wanted to Maximize