Question

question: the measure of society’s benefits due to a market transaction is called...

a. consumer surplus

b. deadweight loss

c. producer surplus

d. toral surplus

Answer 1

When a transaction occurs in the market, both producers and consumers benefit from it.

The benefit consumers receive is called the consumer surplus. Consumer surplus is defined as the difference between the price the consumer is willing to pay for the good and what he/she actually pays for it. It is the area below the demand curve and above the price line.

The benefit producers receive is called the producer surplus. Producer surplus is defined as the difference between the price a producer receives for a good and the price at which he/she is willing to sell the good for. It is the area below the price line and above the supply curve.

Thus, the total benefit which a society receives from a market transaction is the sum of the consumer and producer surplus which is called the total surplus.

So, the correct answer is (d) total surplus.