Surplus and Efficiency?

Question

When a market is in equilibrium, the total surplus created by the market is usually maximized. Explain why this is so and give some examples of circumstances when this might not be so.

Answer 1

When the market is equilibrium in a competitive industry we have total consumer & producer surplus, and no dead weight loss (economic lost to society).

In a monopoly environment , consumer and producer surplus is not maximised. We have a deadweight loss, this is due too little output being produced, so not all consumers can obtain the good. So some econ benefit is transferred from consumer to producer, and some is completely lost in the DWL.....so it's not maximised.