Refer to the above diagram.The area that identifies the maximum sum of consumer surplus and producer surplus is:
A) a + b + c + d + e + f.
B) c + d + f.
C) a + b + e.
D) a + b + c + d.

Question

Refer to the above diagram.The area that identifies the maximum sum of consumer surplus and producer surplus is:
A) a + b + c + d + e + f. 
B) c + d + f. 
C) a + b + e. 
D) a + b + c + d.

Quizplus · Accepted Answer

The area that identifies the maximum sum of consumer surplus and producer surplus is the area above the equilibrium price and below the demand curve (consumer surplus) plus the area below the equilibrium price and above the supply curve (producer surplus). This area is represented by a + b + c + d. Area e represents deadweight loss, which is a loss of total surplus due to the market inefficiency caused by the price ceiling. Area f represents the transfer of surplus from producers to consumers, which does not impact the total surplus in the market. Thus, the maximum sum of consumer surplus and producer surplus is represented by choice D.

Refer to the Above Diagram