Economic efficiency in a free market occurs when
A)consumer surplus is maximised.
B)producer surplus is maximised.
C)the sum of consumer surplus and producer surplus is maximised.
D)price is as low as possible.

Question

Quizplus · Accepted Answer

Economic efficiency in a free market occurs when the total surplus, which is the sum of consumer surplus and producer surplus, is maximized. At the equilibrium point where supply equals demand, the price and quantity exchanged achieves this maximum total surplus. Maximizing consumer surplus or producer surplus alone may not result in economic efficiency. Similarly, lowering the price as much as possible may not be economically efficient if it results in insufficient producer surplus to cover costs and lead to production shortages.

Economic Efficiency in a Free Market Occurs When