Question

The particular price that results in quantity supplied being equal to quantity demanded is the best price because it a. maximizes tax revenue for the government. b. minimizes the expenditure of buyers. c. maximizes the combined welfare of buyers and sellers. d. maximizes costs of the seller.

Answer 1

Answer: CORRECT ANSWER IS OPTION C (MAXIMIZED THE COMBINED WELFARE OF BUYERS AND SELLERS).

EXPLANATION:

The equilibrium price or market-clearing price is referred to as the price when the market is at equilibrium (or the same) i.e quantity demanded (the amount of the product that consumers is willing to buy) equals quantity supplied (i.e the amount of product the producers want to sell). Hence, the agreed quantity is termed as the equilibrium quantity.

Therefore, when there is equilibrium of supply and demand (i.e market equilibrium), it maximizes the total benefits to buyers and sellers participating in that market. Both the buyer and the seller gain at this market structure with no loss end.