ECONOMICS
CONSUMERS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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a social planner intervenes and sets the quantity of output after evaluating buyers’ willingness to pay and sellers’ costs.
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the sum of producer surplus and consumer surplus is maximized.
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all firms are producing the good at the same low cost per unit.
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no buyer is willing to pay more than the equilibrium price for any unit of the good.
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Detailed explanation-1: -The sum of consumer surplus and producer surplus measures the net benefit to society of any level of economic activity. Net benefit is maximized when production and consumption are carried out at the level where the demand and supply curves intersect. Here, the net benefit to society equals the area ACD.
Detailed explanation-2: -The sum of consumer surplus and producer surplus is social surplus, also referred to as economic surplus.
Detailed explanation-3: -Meaning of Market Efficiency Economists use consumer surplus and producer surplus as the basic tools to measure the welfare of the buyers and sellers in a market. These tools are helpful to answer the issue like whether or not scarce resources are efficiently allocated or not.
Detailed explanation-4: -The sum of consumer surplus and producer surplus is called the total surplus; it is one measure economists use as an indicator of the economic health of a society. Total surplus is maximized when the market for a good is in equilibrium.
Detailed explanation-5: -The higher the total surplus, the more efficient the economy is. Total surplus and thus economic efficiency are maximized at the free market equilibrium quantity. The total surplus would be lower at any quantity other than equilibrium, and so economic efficiency would be worse.