Which of the following is an example of a market segment in the context of consumer surplus and willingness to pay?

• A. The equilibrium price determined by supply and demand
• B. The marginal cost of producing an additional unit of a good
• C. The total revenue earned by a firm in a competitive market
• D. College students who are willing to pay a lower price for textbooks

Answer: (D)

Verified step by step guidance

1. Understand the concept of a market segment: In microeconomics, a market segment refers to a distinct group of consumers within a larger market who share similar characteristics or preferences, such as willingness to pay, income level, or age group.
2. Relate market segments to consumer surplus and willingness to pay: Consumer surplus is the difference between what consumers are willing to pay for a good and the price they actually pay. Different market segments may have different willingness to pay, which affects their consumer surplus.
3. Analyze the options given: The equilibrium price, marginal cost, and total revenue are economic variables or outcomes, not groups of consumers. They do not represent segments of the market based on consumer characteristics.
4. Identify the example that fits the definition of a market segment: 'College students who are willing to pay a lower price for textbooks' describes a specific group of consumers with a shared characteristic (lower willingness to pay), making it a market segment.
5. Conclude that the correct example of a market segment in this context is the group of college students with a lower willingness to pay, as it directly relates to consumer surplus and willingness to pay.