A competitive equilibrium price guarantees that
A)consumers who want to buy the product at the market price are satisfied.
B)producers can hoard the quantity they want at the current market price.
C)gains from trade are maximized only by the producers.
D)revenues generated are equal to the cost of production.

Question

Quizplus · Accepted Answer

A competitive equilibrium price is where the market demand and market supply intersect. At this price, the quantity supplied equals the quantity demanded, and thus, consumers who want to buy the product at the market price are satisfied. This means that a competitive equilibrium price satisfies both consumers and producers, leading to gains from trade for both parties. Thus, option A is the correct choice. Option B is incorrect because hoarding of quantity is not related to a competitive equilibrium price. Option C is incorrect because gains from trade are maximized for both parties at a competitive equilibrium price. Option D is also incorrect because revenues generated may exceed the cost of production at a competitive equilibrium price.

A Competitive Equilibrium Price Guarantees That