Which of the following statements is true about an efficient competitive market equilibrium?

Question

BlackTom AI · Accepted Answer

An efficient competitive market equilibrium occurs where the market-clearing price equates quantity demanded with quantity supplied.

1. Relevant knowledge points and concepts
- Supply and demand: demand shows quantity buyers want at each price; supply shows quantity sellers want at each price. 
- Market equilibrium: the price at which quantity demanded equals quantity supplied. 
- Efficiency (Pareto efficiency) in a competitive market: when markets are perfectly competitive, with no externalities and full information, the equilibrium allocation maximizes total surplus (sum of consumer and producer surplus) and no mutually beneficial trades remain undone.

2. Step-by-step reasoning
Step 1: Draw or imagine the downward-sloping demand curve and upward-sloping supply curve. 
Step 2: Identify intersection point of the two curves. That intersection gives equilibrium price (P*) and equilibrium quantity (Q*). 
Step 3: At prices above P*, quantity supplied > quantity demanded, creating a surplus that drives price down. At prices below P*, quantity demanded > quantity supplied, creating a shortage that drives price up. 
Step 4: Only at P* are excess demand and excess supply both zero—market clears. Under standard assumptions, this allocation also maximizes total surplus, making it efficient.

3. Intermediate steps / calculations
No numeric calculation is required here; the intermediate logical steps are: compare Qd(P) and Qs(P) for different prices; find P such that Qd(P) = Qs(P); confirm no excess supply or demand.

4. Why the correct answer is correct
Because equilibrium is defined by equality of quantity demanded and supplied. This equality ensures no unexploited trades and, with perfect competition assumptions, yields Pareto efficiency by maximizing total surplus.

5. Why other possible options would be incorrect
Common incorrect claims include: “equilibrium necessarily maximizes producer surplus alone” (false; it maximizes total surplus), “equilibrium price is set by government” (false in a free market), or “equilibrium always exists and is unique under any conditions” (not true without standard assumptions). These statements contradict supply–demand fundamentals.

6. Conclusion
Therefore, the correct statement is: "The equilibrium price is the one that equates the quantity demanded with the quantity supplied." This matches the provided answer.

Which of the following statements is true about an efficient competitive market equilibrium?单项选择题

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