In a purely competitive industry at equilibrium price and quantity
A)the producer surplus exceeds the consumer surplus.
B)the sum of consumer and producer surplus is maximized.
C)the consumer surplus exceeds producer surplus.
D)the willingness of consumers to pay exceeds the opportunity cost of producing the product.

Question

Quizplus · Accepted Answer

In a purely competitive industry at equilibrium price and quantity, the sum of consumer and producer surplus is maximized. This is because at this point, the price is equal to the marginal cost of production, which makes it impossible for either consumers or producers to increase their surplus without decreasing the other's surplus. Therefore, the market achieves allocative efficiency where the total welfare of society is maximized.

In a Purely Competitive Industry at Equilibrium Price and Quantity