Which of the following best describes economic surplus in the context of market efficiency?

• A. The sum of consumer surplus and producer surplus at the equilibrium price and quantity
• B. The difference between total revenue and total cost for a firm
• C. The amount by which government spending exceeds tax revenue
• D. The total value of goods produced in an economy during a given period

Answer: (A)

Verified step by step guidance

1. Understand the concept of economic surplus: it represents the total net benefit to society from the production and consumption of goods and services in a market.
2. Recall that consumer surplus is the difference between what consumers are willing to pay and what they actually pay, reflecting the benefit to consumers.
3. Recall that producer surplus is the difference between the price producers receive and their cost of production, reflecting the benefit to producers.
4. Recognize that economic surplus is the sum of consumer surplus and producer surplus, which together measure the total gains from trade in a market.
5. Note that economic surplus is maximized at the market equilibrium price and quantity, indicating an efficient allocation of resources.