In general, if a benevolent social planner wanted to maximize the total benefits received by buyers and sellers in a market, the planner should?
Correct answer: B. allow the market to seek equilibrium on its own.
- A. choose a price below the market equilibrium price
- B. allow the market to seek equilibrium on its own.
- C. Choose any price the planner wants because the losses to the sellers (buyers) from any change in price are exactly offset by the gains to the buyers (sellers).
- D. choose a price above the market equilibrium price
Explanation
In a competitive market, equilibrium quantity maximizes the combined benefits of buyers and sellers because marginal benefit equals marginal cost. A benevolent planner therefore allows the market to reach equilibrium on its own.
Last updated
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.
Practise Microeconomics
1,705 free Microeconomics MCQs from Economics, each with the correct answer and an explanation. Unlimited attempts, no account needed.
Exams that ask Economics questions like this
Economics is on 2 papers prepared for on TestUstad, and all of them draw the same bank, so this question is worth knowing for every one of them.
Related questions
_____ 1954 study of U.S trade patterns showed that U.S exports were labor-intensive compared with U.S imports, even though the United States was widely regarded as a relatively capital-abundant nation ?
A attempts to limit outsourcing of jobs to foreigners by requiring that a minimum percentage of a product's value must be produced domestically if that good is to be sold in the domestic market ?
A binding price ceiling creates?
A borrower gives to creditor a security to grantee repayment of a loan. What is this security called ?
A buyer's willingness to pay is that buyer's ?