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#cfa #cfa-level-1 #economics #microeconomics #reading-13-demand-and-supply-analysis-introduction #study-session-4
A precisely analogous argument can be made to show that when all producers produce quantities such that their marginal costs are equated across all firms, total producer surplus is maximized. The result of this analysis is that when all consumers face the same market equilibrium price and are allowed to buy all they desire at that price, and when all firms face that same price and are allowed to sell as much as they want at that price, the total of consumer and producer surplus (total surplus) is maximized from that market. This result is the beauty of free markets: They maximize society’s net benefit from production and consumption of goods and services.
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3.12. Markets Maximize Society’s Total Surplus
antities that equate their marginal values across all consumers. Importantly, that behavior maximizes total consumer surplus. Exhibit 15. How Total Surplus Can Be Reduced by Rearranging Quantity <span>A precisely analogous argument can be made to show that when all producers produce quantities such that their marginal costs are equated across all firms, total producer surplus is maximized. The result of this analysis is that when all consumers face the same market equilibrium price and are allowed to buy all they desire at that price, and when all firms face that same price and are allowed to sell as much as they want at that price, the total of consumer and producer surplus (total surplus) is maximized from that market. This result is the beauty of free markets: They maximize society’s net benefit from production and consumption of goods and services. <span><body><html>


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