Question

Compare a market operating at a quantity lower than equilibrium with the same market operating at the equilibrium quantity. Which of the following statements are true?
a.) the economic surplus is greater at the equilibriumquantity
b) teh producer surplus is greater at the equilibrium quantity
c.) its unclear if the consumer surplus is greater or less at the equilibrium quantity

Answer 1

Answer:

a.) the economic surplus is greater at the equilibrium quantity.

Explanation:

This is correct because at lower production levels a dead weight is created of the potential surplus that is not obtained either for producer nor consumers. At equilibrium, the maximum surplus is achieved and is allocated among producers and consumers