Multiple Choice
Which of the following is an example of a market segment in the context of consumer surplus and willingness to pay?
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5. Consumer and Producer Surplus; Price Ceilings and Floors
Consumer Surplus and Willingness to Pay
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In microeconomics, which term best describes the maximum amount a consumer is willing to pay for a good or service?
A
Willingness to pay
B
Market price
C
Marginal cost
D
Consumer surplus
Verified step by step guidance1
Understand the concept of 'maximum amount a consumer is willing to pay' as the highest price at which a consumer values a good or service before deciding not to purchase it.
Recognize that 'Market price' refers to the actual price at which a good or service is sold, not the maximum willingness to pay.
Know that 'Marginal cost' is the additional cost of producing one more unit of a good, which relates to producers, not consumers' willingness to pay.
Identify 'Consumer surplus' as the difference between what a consumer is willing to pay and what they actually pay, not the maximum willingness itself.
Conclude that the term describing the maximum amount a consumer is willing to pay is 'Willingness to pay'.
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