The price-quantity combination found where the supply and demand curves intersect is a unique combination that is efficient because:
A) producers can sell as much as they want.
B) total surplus is maximized.
C) revenue is sufficient to pay for business costs.
D) consumers can buy as much as they want.
E) new products are being introduced.

Question

Quizplus · Accepted Answer

The price-quantity combination found at the intersection of the supply and demand curves represents the market equilibrium, where the quantity demanded equals the quantity supplied. At this point, the total surplus (the difference between the total value consumers place on the product and the total cost of producing it) is maximized, meaning that the resources are allocated efficiently. A higher price or quantity would decrease the total surplus, while a lower price or quantity would result in a shortage or surplus, respectively. Therefore, the market equilibrium is the most efficient point for allocating resources in a free market economy.

The Price-Quantity Combination Found Where the Supply and Demand Curves