If resources are allocated efficiently,
A)consumer surplus exceeds producer surplus.
B)producer surplus exceeds consumer surplus.
C)the sum of consumer surplus and producer surplus is maximized.
D)marginal social benefit is maximized.
E)marginal social cost is minimized.

Question

Quizplus · Accepted Answer

Allocating resources efficiently means that the output is produced at the lowest possible cost and the goods are distributed to those who value them the most. This results in the maximization of the sum of consumer surplus and producer surplus. This is because the efficient allocation ensures that the goods are consumed by those who value them more than the cost of production and hence consumer surplus is maximized. At the same time, the goods are produced at the lowest possible cost which ensures that the producers earn a surplus over and above the cost of production, leading to the maximization of producer surplus. Therefore, the sum of consumer surplus and producer surplus is maximized under efficient allocation of resources.

If Resources Are Allocated Efficiently