At an efficient market outcome,
A) deadweight loss is maximized.
B) consumer surplus exceeds producer surplus.
C) the total surplus is minimized.
D) the total surplus is maximized.
E) the sum of consumer surplus and producer surplus is minimized.

Question

Quizplus · Accepted Answer

At an efficient market outcome, the total surplus (i.e., the sum of consumer surplus and producer surplus) is maximized. This occurs when the market equilibrium is reached without any external interference, such as taxes or subsidies. Allocative efficiency is achieved, meaning that resources are allocated to their highest valued use, and there is no deadweight loss. Consumers who are willing to pay more than the market price are able to purchase the good, increasing their surplus. Producers who are able to sell at a higher price than the market price also benefit, increasing their surplus. Overall, everyone benefits from an efficient market outcome, and the total surplus is maximized.

At an Efficient Market Outcome