Consider the following statements:
(A) If a market generates a side effect or externality, then the market solutions are inefficient.
(B) If a market is efficient, then the quantity produced in the market maximizes both producers' and consumers' surplus.
(C) Consumer's surplus is the buyer’s WTP (Willingness to Pay) minus the seller’s cost.
(D) Smith’s invisible hand concept implies that competitive market outcomes generate equity among the members in the society.
(E) Competitive market equilibrium is Pareto efficient.
Choose the correct answer from the options given below:

Correct option is A

Correct Option: 1.(A), (B), (E) only 

Explanation:

• Statement (A) If a market generates a side effect or externality then the market solutions are inefficient.
  True — Externalities cause a divergence between private and social costs/benefits, so competitive markets without intervention are inefficient.
  
• Statement (B) If a market is efficient, then the quantity produced in the market maximise both producer’s and consumer’s surplus.
  True — Market efficiency (total surplus maximization) means the sum of consumer and producer surplus is maximized at equilibrium.
  
• Statement (C) Consumer’s surplus is the buyer’s WTP minus the seller’s cost.
  False — Consumer surplus = buyer’s WTP minus price paid, not seller’s cost. Seller’s cost relates to producer surplus.
  
• Statement (D) Smith’s invisible hand concept implies that competitive market outcome generates equity among the members in the society.
  False — Invisible hand leads to efficiency (Pareto optimality), not necessarily equity.
  
• Statement (E) Competitive market equilibrium is Pareto efficient.
  True — Under ideal conditions (no externalities, perfect competition, etc.), this is the First Welfare Theorem.