When a perfectly competitive market is in equilibrium, consumer and producer surplus are maximized.

Question

Quizplus · Accepted Answer

In a perfectly competitive market, the prices are determined by the market force of supply and demand. As a result, at the equilibrium price, both consumer and producer surplus are maximized. There is no other price at which both parties could be better off. Therefore, the statement is true. In a perfectly competitive market, consumer and producer surplus are maximized at the equilibrium point where the quantity supplied equals quantity demanded at the market price. At this point, both consumers and producers receive the maximum benefit they can obtain from the market, leading to the overall efficiency of the market. Therefore, consumer and producer surplus is maximized in a perfectly competitive market at the equilibrium point.

When a Perfectly Competitive Market Is in Equilibrium, Consumer and Producer