In general,the sum of consumer and producer surplus is maximized under the conditions of
A)any market structure.
B)monopolistic competition.
C)perfect competition.
D)oligopoly.
E)monopoly.

Question

Quizplus · Accepted Answer

Perfect competition is characterized by a large number of small firms selling identical products, free entry and exit, perfect information, and perfect mobility of factors of production. In the long run, firms in perfect competition earn zero economic profit, and the market reaches allocative and productive efficiency, where the price equals the marginal cost and the total surplus (the sum of consumer and producer surplus) is maximized. This is because, in perfect competition, no one can influence the market price, which is determined by the intersection of the industry's supply and demand curves. Therefore, consumers and producers can exchange goods and services at a mutually beneficial price and quantity, maximizing their welfare and the total welfare of society.

In General,the Sum of Consumer and Producer Surplus Is Maximized