Question

Economic surplus in a market is the sum of​ _____ surplus and​ _____ surplus. In a competitive​ market, with many buyers and sellers and no government​ restrictions, economic surplus is at a​ _____ when the market is in​ _____.
A. ​consumer; government;​ maximum; equilibrium
B. ​consumer; producer;​ maximum; equilibrium
C. ​consumer; producer;​ maximum; disequilibrium
D. ​consumer; producer;​ minimum; equilibrium

Answer 1

Answer:

The correct answer is option B.

Explanation:

Economic surplus is the sum of consumer surplus and producer surplus.

The consumer surplus is the difference between the highest price that consumer is willing to pay and the price it actually pays.

Similarly, the producer surplus is the difference between the lowest price that a producer is willing to receive and the price it actually gets.

Graphically, consumer surplus is the area between the equilibrium price and the highest price. While the producer surplus is the area between the equilibrium price and the lowest price.

So the economic surplus is maximum when the market is in equilibrium.