Figure 7-24
-Refer to Figure 7-24.The equilibrium allocation of resources is
A)efficient because total surplus is maximized at the equilibrium.
B)efficient because consumer surplus is maximized at the equilibrium.
C)inefficient because consumer surplus is larger than producer surplus at the equilibrium.
D)inefficient because producer surplus is not maximized.

Question

Figure 7-24 
-Refer to Figure 7-24.The equilibrium allocation of resources is
A)efficient because total surplus is maximized at the equilibrium. 
B)efficient because consumer surplus is maximized at the equilibrium. 
C)inefficient because consumer surplus is larger than producer surplus at the equilibrium. 
D)inefficient because producer surplus is not maximized.

Quizplus · Accepted Answer

The equilibrium allocation of resources is efficient because it maximizes total surplus, which is the sum of producer and consumer surplus. At any other allocation, total surplus would be lower, indicating that resources are not being utilized as efficiently. Therefore, option A is correct. Option B is incorrect because while consumer surplus is maximized at the equilibrium, it alone does not determine efficiency. Similarly, option C is incorrect because the comparison of consumer and producer surplus alone is not sufficient to determine efficiency. Lastly, option D is incorrect because producer surplus is a component of total surplus, which is maximized at the equilibrium.

Figure 7-24 -Refer to Figure 7-24.The Equilibrium Allocation of Resources Is