Market competition ensures that
A)consumer surplus equals producer surplus.
B)consumer surplus is greater than producer surplus.
C)consumer surplus is less than producer surplus.
D)the sum of consumer surplus and producer surplus is maximized.
E)the sum of consumer surplus and producer surplus equals zero.

Question

Quizplus · Accepted Answer

Market competition ensures that the sum of consumer surplus and producer surplus is maximized. This happens because in a competitive market, producers are forced to offer goods/services at the lowest possible price to attract consumers, leading to an increase in consumer surplus. At the same time, producers also try to minimize their costs, which leads to an increase in producer surplus. The intersection of the supply and demand curves in a competitive market ensures that both consumer and producer surpluses are maximized.

Market Competition Ensures That