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30 April, 08:24

Suppose you were assigned the task of choosing a price that maximized economic surplus. What price would you choose? Why? A. Choose a price of zero because that is where consumer surplus (the area under the demand curve and above the price) is maximized. B. Choose a price ceiling below the equilibrium so that consumers won't have to pay too much. C. Choose the price where the quantity demanded equals the quantity supplied because that is the equilibrium condition. D. Choose the price where the quantity supplied is maximized because that is where output is the greatest. E. Choose the highest price possible because that is where producer surplus (the area above the supply curve and below the price) is maximized.

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  1. 30 April, 08:44
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    C. Choose the price where the quantity demanded equals the quantity supplied because that is the equilibrium condition.

    Explanation:

    The equilibrium price is the most ideal because at this price the consume is willing to buy, if price goes above this the consumer may look for an alternative and this will further increase surplus.

    Also when there is surplus the suppliers will find a way to sell competitively at the equilibrium price.
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