The difference between consumer surplus and producer surplus in a market is equal to the deadweight loss.

Question

Quizplus · Accepted Answer

Consumer surplus and producer surplus together represent the total benefits to consumers and producers participating in a market, while deadweight loss refers to the loss of economic efficiency when the equilibrium for a good or a service is not achieved. The difference between consumer surplus and producer surplus does not equate to deadweight loss; instead, deadweight loss occurs when there is a deviation from the optimal market equilibrium, often due to external factors like taxes, subsidies, or price controls.

The Difference Between Consumer Surplus and Producer Surplus in a Market