Free markets maximize consumer plus producer surplus regardless of the level of competition.

Question

Quizplus · Accepted Answer

Free markets may not necessarily maximize consumer and producer surplus if there is a lack of competition. In a monopolistic market, for example, the producer may charge higher prices and the consumer may have limited choices, resulting in a reduction of both consumer and producer surplus. Therefore, the level of competition is important for maximizing consumer and producer surplus.

Free Markets Maximize Consumer Plus Producer Surplus Regardless of the Level