What condition leads to maximizing Economic Surplus?

Maximizing economic surplus occurs when marginal benefits equal marginal costs. This principle is rooted in the idea that economic efficiency is achieved when the resources are allocated in a way that maximizes total welfare. When marginal benefits, which represent the additional satisfaction or utility received from consuming one more unit of a good or service, equal marginal costs, which reflect the additional costs incurred from producing that unit, a firm or individual is neither overproducing nor underproducing.

At this equilibrium point, the value to consumers of the last unit produced is exactly equal to the cost to producers of making that unit. If marginal benefits exceed marginal costs, more of the good should be produced to capture additional surplus. Conversely, if marginal costs exceed marginal benefits, production should be reduced. Thus, the condition of marginal benefits equaling marginal costs ensures that resources are utilized most efficiently, leading to the maximization of economic surplus.