Markets Fail to Maximize Total Surplus When

question 29

Multiple Choice

Markets fail to maximize total surplus when:

• A)individual choices impose costs or benefits on others.
• B)society's choices impose costs or benefits on other societies.
• C)all costs and benefits are received by participants in transactions.
• D)producer surplus is not exactly equal to consumer surplus.

---

Definitions:

Producer Surplus

The gap between the price producers are ready to take for offering a product or service and the actual payment they receive.

Consumer Surplus

The difference between what consumers are willing to pay for a good or service and what they actually pay, representing the benefit consumers receive.

Producer Surplus

The difference between what producers are willing and able to supply a good for and the price they actually receive, measuring the benefit to producers.

Total Surplus

The total net gain to society from creating and consuming a product or service, encompassed by the combination of consumer and producer surplus.