Suppose the magnitude of consumer surplus is roughly equal to the magnitude of producer surplus. Which of the following would be true?
A) Market prices would converge smoothly to the predicted equilibrium price.
B) Market price would tend to either remain below the predicted equilibrium price or converge to equilibrium from below.
C) Market price would tend to either remain above the predicted equilibrium price or converge to equilibrium from above.
D) Market prices would tend to remain above the predicted equilibrium price due to tacit collusion and price signalling by the sellers.

Question

Quizplus · Accepted Answer

When consumer surplus is roughly equal to producer surplus, it indicates a well-functioning market where supply and demand are balanced, leading to prices converging smoothly to the predicted equilibrium price. This balance suggests efficient market operations without significant distortions.

Suppose the Magnitude of Consumer Surplus Is Roughly Equal to the Magnitude