Which of the following statements is true of competitive market equilibrium?
A) The determination of equilibrium price and quantity is independent of the demand for goods.
B) Social surplus is minimized at the competitive equilibrium.
C) At the competitive equilibrium, there are no unexploited gains from trade.
D) A competitive equilibrium is determined only by a few large sellers in the market.

Question

Quizplus · Accepted Answer

At the competitive equilibrium, there are no unexploited gains from trade. This means that all potential gains from trade have been realized, and no individual can benefit further without causing harm to another. In other words, the allocation of resources is efficient, and there is no deadweight loss. The determination of equilibrium price and quantity is dependent on both the supply and demand for goods, as they interact to find a price that satisfies both parties. Social surplus is maximized at the competitive equilibrium, not minimized. A competitive equilibrium is determined by the interaction of many buyers and sellers, not a few large sellers.

Which of the Following Statements Is True of Competitive Market