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

Question

Quizplus · Accepted Answer

In a competitive market with no market failures, the price is free to reach its equilibrium level, where supply equals demand. At this equilibrium, economic surplus (the sum of consumer and producer surplus) is maximized and resources are allocated efficiently. Therefore, economic efficiency and surplus are achieved in a competitive market. Choices A, B, and D involve government interference, which may not necessarily result in economic efficiency and surplus. Choice C does not consider the demand for the good, which is a critical factor in determining economic surplus.

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