When a perfectly competitive,well-functioning market is not in equilibrium:
A) total surplus is not maximized.
B) there are no exchanges that can make some better off without someone becoming worse off.
C) the market is efficient.
D) All of these are true.

Question

Quizplus · Accepted Answer

In a perfectly competitive, well-functioning market, equilibrium is reached when supply and demand cross at a certain price, maximizing total surplus (consumer and producer surplus). When the market is not in equilibrium, either a shortage or a surplus exists, resulting in some potential gains from trade that are not being realized. This means that total surplus is not maximized.

When a Perfectly Competitive,well-Functioning Market Is Not in Equilibrium