If marginal benefit is equal to marginal cost,then the
A) producer surplus is equal to the consumer surplus.
B) sum of producer surplus and consumer surplus is as large as possible.
C) sum of producer surplus and consumer surplus equals zero.
D) market has squeezed out total surplus so that it equals zero.
E) deadweight loss is more than zero but less than its maximum.

Question

Quizplus · Accepted Answer

When marginal benefit is equal to marginal cost, the output level maximizes the sum of producer surplus and consumer surplus. This means that the market is allocating resources efficiently and the total surplus is as large as possible. Hence, the choice (B) is the correct answer.

If Marginal Benefit Is Equal to Marginal Cost,then the