Consider a perfectly competitive market that is in equilibrium.

(a) Why the market equilibrium is the social optimum (i.e. social surplus is maximized)?

Explain what would happen if the market quantity Q is more than or less than the market

equilibrium quantity Q*. .

(b) Suppose supply in this market increases. How will this affect consumer surplus?

(c) Suppose demand in this market decreases. How will this affect producer surplus?