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Which of the following best describes equilibrium?

A. A situation where the government intervenes to allocate resources
B. A situation where only one individual or firm takes an optimum decision
C. A situation where no economic agent would benefit by changing his or her behavior
D. A situation where economic agents do not optimize as they do not have perfect information

1 Answer

4 votes

Answer:

C. A situation where no economic agent would benefit by changing his or her behavior

Step-by-step explanation:

An economic equilibrium is when the agents are optimizing their decisions and opposing market forces are equal. This point allows the economic agents to maximize their utility and any change from this point will cause all agents to move away from potential maximum benefits.

In a natural equilibrium there is usually no government intervention so option A is false. Option B gives only one agent potential benefits and as such there is no equilibrium. Option D is conditional and may or may not happen as when the agents find missing information they would optimize again and move to an equilibrium.

Hope that helps.

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