In general (and in the absence of market failures),economic surplus will be maximized and economic efficiency will be achieved
A)when consumers and producers can agree on the most advantageous division of economic surplus.
B)when the government successfully determines what is best for society as a whole.
C)when the government is able to impose an equilibrium price.
D)in a competitive market where price is free to achieve its market- clearing equilibrium level.
E)when resources are allocated such that production of the good is maximized.

Question

Quizplus · Accepted Answer

In a competitive market where price is free to achieve its market-clearing equilibrium level, the forces of supply and demand will ensure that economic surplus is maximized and economic efficiency is achieved. This is because at the equilibrium price, the quantity demanded by consumers will exactly equal the quantity supplied by producers, and there will be no deadweight loss. Any allocation of resources that deviates from the market-clearing equilibrium will result in either excess supply or excess demand, which will lead to inefficiency and a lower level of economic surplus. Therefore, the best choice is D.

In General (And in the Absence of Market Failures),economic Surplus