If the demand curve reflects consumers' full willingness to pay, and the supply curve reflects all costs of production, then which of the following is true?
A)The benefit surpluses shared between consumers and producers will be maximized.
B)The benefit surpluses received by consumers and producers will be equal.
C)There will be no consumer or producer surplus.
D)Consumer surplus will be maximized, and producer surplus will be minimized.

Question

Quizplus · Accepted Answer

When the demand curve reflects consumers' full willingness to pay, and the supply curve reflects all costs of production, the market reaches an equilibrium where the benefit surpluses (consumer and producer surplus) are maximized. This is a fundamental result of welfare economics, indicating that resources are allocated in the most efficient way possible under perfect competition.

If the Demand Curve Reflects Consumers' Full Willingness to Pay