Question

Assume that candle wax is traded in a perfectly competitive market in which the demand curve captures buyers' full willingness to pay while the supply curve reflects all production costs. For each of the following situations, indicate whether the total output should be increased, decreased, or kept the same in order to achieve allocative and productive efficiency.

Total surplus is at a maximum:_________

Answer 1

Answer: The total output should remain the same in order to achieve allocative and productive efficiency.

Explanation: Total surplus is at Maximum when the price equals the market equilibrium price.