Question

Economists often use a Total Surplus Standard when judging the relative merits of a particular market outcome. Under this standard, an outcome A is considered preferable to another outcome B if Total Surplus under A is larger than Total Surplus under B. Explain whether, when applying such a standard, it might be possible that TS(A) > TS(B) even if outcome B is Pareto efficient.

Answer 1

Total surplus outcome is calculated to be the sum of producer surplus and consumer surplus. On the other hand Pareto optimal point is a point where you cannot make one party better off without making the other party worse off. These defination define how varying concepts both Pareto optimal point and total surplus are.

When the total surplus is given to be TS(A) > TS(B) , which is additive summation of respective producer and consumer surplus. But it must be noted ,even if quantitative value for outcome A might be more, this doesn't imply this is the Pareto optimal point. Same same imply for outcome B also , lesser values of TS doesn't qualify for it not being Pareto optimal.

In conclusion these are two different concepts and must be looked upon differently.