The free market maximizes the gains from trade, producing the level of output that maximizes consumer surplus plus producer surplus.

Question

Quizplus · Accepted Answer

The free market is driven by the forces of supply and demand, which leads to the quantity of goods and services being produced that maximizes the combined consumer and producer surplus. This occurs because buyers and sellers voluntarily trade goods and services that they value more for those that they value less, resulting in a net gain for both parties. As a result, the free market is seen as an efficient way to allocate resources and maximize economic welfare.

The Free Market Maximizes the Gains from Trade, Producing the Level