Welfare economics explains which of the following in the market for televisions?
A)The government sets the price of televisions;firms respond to the price by producing a specific level of output.
B)The government sets the quantity of televisions;firms respond to the quantity by charging a specific price.
C)The market equilibrium price for televisions maximizes the total welfare of television buyers and sellers.
D)The market equilibrium price for televisions maximizes consumer welfare and minimizes producer profit.

Question

Quizplus · Accepted Answer

Welfare economics focuses on analyzing the allocation of resources and the distribution of goods and services, aiming to achieve the optimal level of social welfare. In the market for televisions, the market equilibrium price determines the quantity of televisions that buyers and sellers are willing and able to exchange, generating consumer and producer surplus. The market equilibrium price represents the optimal allocation of resources, where the total welfare of buyers and sellers is maximized. Hence, choice C is the correct answer. Choices A and B describe a scenario where the government intervenes to regulate the market, which is not necessarily the case in a free market economy. Choice D refers only to the specific welfare of consumers and producers, not the total welfare of both groups.

Welfare Economics Explains Which of the Following in the Market