Which of the following statements best describes the economic changes related to economic surplus and efficiency that occurred between 1870 and 1920?

• A. There was little change in economic surplus or efficiency during this period.
• B. Economic surplus decreased due to widespread market failures and declining productivity.
• C. Efficiency in resource allocation was reduced as monopolies became less prevalent.
• D. Rapid industrialization led to increased production efficiency and a significant rise in consumer and producer surplus.

Answer: (D)

Verified step by step guidance

1. Step 1: Understand the concept of economic surplus, which is the sum of consumer surplus and producer surplus. Consumer surplus is the difference between what consumers are willing to pay and what they actually pay, while producer surplus is the difference between the price producers receive and their cost of production.
2. Step 2: Recognize that economic efficiency occurs when resources are allocated in a way that maximizes total economic surplus, meaning no resources are wasted and both consumers and producers benefit as much as possible.
3. Step 3: Analyze the historical context between 1870 and 1920, a period marked by rapid industrialization, technological advancements, and improvements in production methods, which typically lead to increased productivity and lower costs.
4. Step 4: Connect the increase in production efficiency to a rise in economic surplus, as more goods can be produced at lower costs, benefiting producers, and lower prices or better products benefit consumers, increasing consumer surplus.
5. Step 5: Conclude that the statement describing rapid industrialization leading to increased production efficiency and a significant rise in consumer and producer surplus best captures the economic changes related to economic surplus and efficiency during this period.