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- Subject
- Surpluseconomics-mcqs › surplus
- Published
- 29 May 2019
- Last updated
- 28 May 2026
What happens if a well-intentioned social planner decides to produce a quantity of a good that is greater than the market equilibrium level?
Multiple choice question for Surplus. Select an option, then review the explanation below.
Explanation
When production exceeds the equilibrium quantity, the cost to produce the last unit surpasses the value buyers place on it, leading to inefficiency and a reduction in total surplus.
More Surplus MCQs
Practice related questions from the same subject.
- 1.When a market produces an externality, how effective are free market solutions?
- 2.When a producer possesses market power and can affect the product's price, how do free market outcomes typically perform?
- 3.Assuming buyers act rationally and there is no market failure, what can be said about free market outcomes?
- 4.According to Adam Smith's concept of the invisible hand, what is the result of a competitive market equilibrium?
- 5.If a new bicycle is priced at Rs 300, Natalie values it at Rs 400, and the production cost for the seller is Rs 200, what is the total surplus when Natalie purchases the bicycle?