Asked by Areeba Akhtar on Sep 23, 2024
Verified
When the market is in equilibrium,with no government intervention,
A) Total surplus is minimized
B) Total surplus is maximized
C) Government maximizes total revenue
D) None of the above
Total Surplus
The sum of consumer and producer surplus, representing the total benefit to society from the production and consumption of goods or services.
Equilibrium
A state in which market supply and demand balance each other, and as a result, prices become stable.
- Understand the notion of market surplus, encompassing both consumer and producer surplus.
Verified Answer
EW
Ebony Watson3 days ago
Final Answer :
B
Explanation :
When the market is in equilibrium, it means that the quantity demanded equals the quantity supplied at the market-clearing price. At this point, the total surplus (the sum of consumer surplus and producer surplus) is maximized. Any government intervention (such as taxes, subsidies, price floors or ceilings) could result in decreasing the total surplus. Therefore, the best choice is B - Total surplus is maximized.
Learning Objectives
- Understand the notion of market surplus, encompassing both consumer and producer surplus.