When a perfectly competitive, well-functioning market is in equilibrium:
A) consumer surplus is minimized.
B) producer surplus is minimized.
C) total surplus is maximized.
D) total surplus is zero.

Question

Quizplus · Accepted Answer

In a perfectly competitive, well-functioning market, equilibrium occurs when the quantity demanded is equal to the quantity supplied at the market-clearing price. At this point, total surplus is maximized, which means that the combined benefit to consumers (consumer surplus) and producers (producer surplus) is at its highest possible level. Therefore, choice C is the correct answer.

When a Perfectly Competitive, Well-Functioning Market Is in Equilibrium