Question

The particular price that results in quantity supplied being equal to quantity demanded is the best price because it

a. maximizes costs of the seller.b. maximizes tax revenue for the government.c. maximizes the combined welfare of buyers and sellers.d. minimizes the expenditure of buyers.

Answer 1

C) maximizes the combined welfare of buyers and sellers.

Step-by-step explanation:

The equilibrium price or the price that results in quantity supplied being equal to quantity demanded, maximizes both supplier and consumer surplus.

Modern economic theory believes that both consumers and suppliers are rational and they both seek to maximize their well-being: suppliers seek to maximize profit and consumers seek to maximize utility. The equilibrium price is the price at which both profit maximizing suppliers and utility maximizing customers obtain the most benefits.