Exhibit 3A-1 Comparison of Market Efficiency and Deadweight Loss

As shown in Exhibit 3A-1, if the market is in equilibrium, then total surplus is represented by:
A) ABEFD + EFG
B) ABEC + CEFD
C) CDFE + EFG
D) ABEFD - BEF

Question

Exhibit 3A-1 Comparison of Market Efficiency and Deadweight Loss

As shown in Exhibit 3A-1, if the market is in equilibrium, then total surplus is represented by:
A) ABEFD + EFG 
B) ABEC + CEFD 
C) CDFE + EFG 
D) ABEFD - BEF

Quizplus · Accepted Answer

In equilibrium, total surplus is maximized and represented by the sum of consumer surplus (ABE) and producer surplus (EFD). Therefore, option B (ABEC + CEFD) represents the correct combination of these two components of total surplus. Option A (ABEFD + EFG) includes an extra area (EFG) which does not contribute to total surplus and option C (CDFE + EFG) omits the area representing consumer surplus (ABE). Option D (ABEFD - BEF) only includes the area of the triangle representing the producer surplus (EFD), but leaves out the consumer surplus (ABE).