The sum of consumer and producer surplus increases when producers sell more than the market equilibrium quantity.

Question

Quizplus · Accepted Answer

The sum of consumer and producer surplus is maximized at the market equilibrium quantity. If producers increase their output beyond the market equilibrium quantity, they will have to lower their prices to induce buyers to purchase more. As a result, producer surplus will decrease, and any gain in consumer surplus will be less than the loss in producer surplus. Therefore, the sum of consumer and producer surplus will decrease when producers sell more than the market equilibrium quantity.

The Sum of Consumer and Producer Surplus Increases When Producers