Which of the following occurs when a market is efficient?
A) Consumer surplus equals producer surplus.
B) Consumer surplus is as large as possible.
C) Producer surplus is as large as possible.
D) The sum of consumer surplus and producer surplus is maximized.
E) The marginal benefit exceeds the marginal cost by as much as possible.

Question

Quizplus · Accepted Answer

When a market is efficient, the sum of consumer surplus and producer surplus is maximized. This means that the market is producing and allocating goods and resources in the most optimal way possible. This is also known as Pareto efficiency. However, it does not necessarily mean that consumer surplus and producer surplus are equal, or that they are as large as possible individually. It simply means that the total surplus, which is the sum of both, is at its maximum.

Which of the Following Occurs When a Market Is Efficient