The sum of consumer surplus and producer surplus is equal to

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The question asks about the sum of consumer surplus and producer surplus, and what this sum is equal to in economic terms. 
Option 1: 'value appropriated' — This phrasing is not standard in welfare economics for the total surplus. It could be misinterpreted as the share of value captured by one party, but it does not describe the combined welfare measure that the market creates. 
Option 2: 'managerial value of the product' — This term refers to managerial or organizational assessments of a product's worth, not the aggregate benefit to society from trade. It does not capture the economic surplus generated by both buyers and sellers in a competitive market. 
Option 3: 'economic value of the product' — While this could hint at worth, it is vague and does not specify the welfare accounting concept. Economic value might be interpreted in various ways, but it does not necessarily denote the sum of consumer and producer surplus, which is a precise measure in market efficiency analysis. 
Option 4: 'value created' — This phrasing aligns with the standard description of total surplus in welfare economics, which is the total value generated by a transaction, comprising both what consumers gain (consumer surplus) and what producers gain (producer surplus). It effectively captures the net benefit created by the market activity. 
In summary, while the first three options use terms that either mischaracterize or are too vague about welfare, the phrase 'value created' best matches the conventional concept of the sum of consumer and producer surplus, i.e., the total surplus generated by the market.

The sum of consumer surplus and producer surplus is equal to

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The sum of consumer surplus and producer surplus is equal to

View Explanation

Log in for full answers

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

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