At the long-run equilibrium of a perfectly competitive industry, the sum of consumer surplus and producer surplus is
A) minimized
B) maximized
C) equal to the deadweight loss

Question

Quizplus · Accepted Answer

At the long-run equilibrium of a perfectly competitive industry, the market price will be equal to the marginal cost of the firms, resulting in the production and consumption of the socially optimal level of output. At this point, consumer surplus and producer surplus will be maximized, as they are both included in the total surplus generated by the market. Therefore, the correct choice is B) maximized. The deadweight loss only occurs when the market is not operating at the socially optimal level of output and is not relevant to the long-run equilibrium of a perfectly competitive industry.

At the Long-Run Equilibrium of a Perfectly Competitive Industry, the Sum