Question

If the demand curve reflects consumers' full willingness to pay, and the supply curve reflects all costs of production, then which of the following is true?

A. The benefit surpluses shared between consumers and producers will be maximized.
B. The benefit surpluses received by consumers and producers will be equal.
C. There will be no consumer or producer surplus.
D. Consumer surplus will be maximized, and producer surplus will be minimized.

Answer 1

A) The benefit surpluses shared between consumers and producers will be maximized.

Step-by-step explanation:

Both consumer surplus and supplier surplus are maximized at the equilibrium point, the addition of consumer and supplier surplus is called total economic surplus.

Consumer surplus is defined as the difference between the price that a customer is willing to pay for a good and the actual price of the good.

Supplier surplus is defined as the difference between the price that a supplier is willing to charge for a good and the actual price of the good.