Figure 14-14
-Refer to Figure 14-14.To maximize total surplus,a benevolent social planner would choose which of the following outcomes?

Question

Figure 14-14 
-Refer to Figure 14-14.To maximize total surplus,a benevolent social planner would choose which of the following outcomes?

Quizplus · Accepted Answer

At this quantity and price, consumer surplus (area A+B+C) and producer surplus (area E+F+G) are maximized. At any lower quantity or price, there would be unexploited gains from trade (deadweight loss). At any higher quantity or price, total surplus would decrease because the marginal cost of producing additional units would be higher than the marginal benefit to consumers. Therefore, the social planner would choose the outcome where total surplus is maximized, which is at Q=45 and P=45.

Figure 14-14 -Refer to Figure 14-14.To Maximize Total Surplus,a Benevolent Social Planner