When economists use the word "perfect," what does it indicate about the outcome of a market?
A) Deadweight gains are maximized and marginal output is equal to zero.
B) Consumer surplus is maximized and economic growth results from accelerated consumer spending.
C) Producer surplus is minimized because society is harmed by excessive firm profits.
D) Social welfare is maximized,resulting from an absence of deadweight loss.
E) Producer surplus and consumer surplus are exactly equal.

Question

Quizplus · Accepted Answer

When economists use the word "perfect," they are usually referring to a situation in which social welfare is maximized, resulting from an absence of deadweight loss. This is known as a "perfectly competitive" market, where the interactions of buyers and sellers lead to an efficient allocation of resources and prices that reflect the true value of goods and services. In such a situation, producer surplus and consumer surplus are also likely to be significant, and may be roughly equal.

When Economists Use the Word "Perfect," What Does It Indicate