Gains from trade are maximized at the:
A) equilibrium price and quantity.
B) midpoint on the demand curve.
C) point at which output is maximized.
D) vertical intercept on the supply curve.

Question

Quizplus · Accepted Answer

Gains from trade occur when buyers and sellers engage in mutually beneficial trade, which occurs at the point where the quantity demanded equals the quantity supplied (i.e. the equilibrium quantity) and the price at which they are willing to engage in trade (i.e. the equilibrium price). Hence, gains from trade are maximized at the equilibrium price and quantity.

Gains from Trade Are Maximized at The