When a perfectly competitive market is in equilibrium,:
A)consumer and producer surplus are maximized.
B)price is maximized.
C)quantity is maximized.
D)deadweight loss is positive.

Question

Quizplus · Accepted Answer

In a perfectly competitive market equilibrium, both consumer and producer surplus are maximized. This occurs where the supply and demand curves intersect, at the point where the price is equal to the marginal cost of production. At this point, there is no deadweight loss because the market is operating at its most efficient level. In a perfectly competitive market, consumer and producer surplus are maximized at the equilibrium point where marginal cost equals marginal revenue. This is because at this point, the price reflects the value that consumers place on the product and the cost of producing it for the producers. Therefore, any deviation from this point would either result in a decrease in consumer surplus or producer surplus.

When a Perfectly Competitive Market Is in Equilibrium