If buyers are rational and there is no market failure ?
Correct answer: E. free market solutions are efficient and free market solutions maximize total surplus
- A. free market solutions are efficient
- B. free market solutions maximize total surplus
- C. all of these answers
- D. free market solutions are equitable
- E. free market solutions are efficient and free market solutions maximize total surplus
Explanation
With rational buyers and no market failure, competitive market decisions maximize total surplus and achieve efficiency. Efficiency does not imply equity, so the statement about fairness is not necessarily true.
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About Microeconomics
Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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