Which of the Following Statements Is TRUE Regarding Free Markets

question 90

Multiple Choice

Which of the following statements is TRUE regarding free markets? I. The sum of consumer surplus and producer surplus are maximized. II. The sellers with the highest costs of production sell the goods. III. The buyers with the highest willingness to pay purchase the goods. IV. The government must subsidize firms to ensure that there are no unexploited gains from trade.

• A) I only
• B) I, II, and III only
• C) II, III, and IV only
• D) I and III only

---

Definitions:

Common Shares

Equity investments that represent ownership interests in a corporation, entitling holders to dividends and voting rights.

Net Income

The total earnings of a company after subtracting all expenses, taxes, and losses from total revenue.

Dividends

Payments made by a corporation to its shareholder members, often derived from the company's profits.

Preferred Shares

A class of ownership in a corporation that has a higher claim on its assets and earnings than common shares, often receiving dividends before common shareholders.