Asked by Tristan Jansen on May 27, 2024
Verified
If an allocation of resources is efficient, then
A) consumer surplus is maximized.
B) producer surplus is maximized.
C) all potential gains from trade among buyers are sellers are being realized.
D) the allocation achieves equality as well.
Gains From Trade
The benefits that parties obtain from engaging in voluntary trading, often leading to an increase in overall welfare and efficiencies.
Consumer Surplus
The mismatch between the aggregate amount consumers intend and can afford to pay for a product or service and the aggregate amount they really pay.
Producer Surplus
The difference between the amount a producer is willing to accept for a good versus what they actually receive in the market.
- Understand the welfare implications of market equilibria and disequilibria.
Verified Answer
CS
Chandler StricklandJun 01, 2024
Final Answer :
C
Explanation :
An efficient allocation of resources means that all potential gains from trade among buyers and sellers are being realized, indicating that resources are being used in the most productive way possible. This does not necessarily mean that consumer surplus, producer surplus is maximized, or that the allocation achieves equality.
Learning Objectives
- Understand the welfare implications of market equilibria and disequilibria.