Consumer surplus is a gain from exchange, but producer surplus is a loss from exchange.

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BlackTom AI · Accepted Answer

The statement in the question links consumer surplus to a gain from exchange and then claims that producer surplus is a loss from exchange. 
Option A: 'True' — This is not correct. Consumer surplus does represent a gain from exchange for consumers, but producer surplus is also a gain from exchange for producers, not a loss. The basic idea is that both sides benefit from voluntary trade, though in different amounts and at different prices.
Option B: 'False' — This is the accurate choice. Producer surplus measures the difference between the price producers receive and the minimum price at which they would be willing to produce each unit. When a transaction occurs at a market price above a producer’s marginal cost, the producer gains; there is no loss to producers in the standard surplus framework. The same logic applies to consumer surplus, which is the difference between what consumers are willing to pay and what they actually pay, representing a benefit to consumers. 
In summary, the paired concepts are both gains from exchange for the respective sides, so labeling producer surplus as a loss is incorrect.

ECON 201 Quiz 2: Ch 3 on S&D

Consumer surplus is a gain from exchange, but producer surplus is a loss from exchange.

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ECON 201 Quiz 2: Ch 3 on S&D

Consumer surplus is a gain from exchange, but producer surplus is a loss from exchange.

View Explanation

Log in for full answers

Similar Questions

The sum of consumer surplus and producer surplus is equal to

According to the lecture, economic welfare or value created represents:

Consider a perfectly competitive market at equilibrium. The equilibrium price defines

Amanda buys a ruby for $330 for which she was willing to pay $340. The minimum acceptable price to the seller, Tony, was $140. Tony experiences a

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Figure 9-2Refer to Figure 9-2. The increase in total surplus resulting from trade is