social surplus is maximized in competitive equilibrium

Question

Quizplus · Accepted Answer

In a competitive equilibrium, both allocative and productive efficiency are achieved, which means that resources are allocated in a way that maximizes the satisfaction of consumers and producers at the lowest possible cost. This occurs when marginal social benefit equals marginal social cost. Therefore, social surplus is maximized when both a and b are achieved. Consumer surplus and producer surplus may not necessarily be maximized or minimized; they are just different measures of the benefits and costs of trade to consumers and producers.

Social Surplus Is Maximized in Competitive Equilibrium