In the context of consumer surplus and willingness to pay, how can a restaurant supplier create the most value for its restaurant customers?

• A. By limiting the variety of products available to restaurant customers
• B. By reducing product quality to lower costs for the supplier
• C. By offering products that closely match the restaurants' willingness to pay, thereby maximizing their consumer surplus
• D. By setting prices above the restaurants' willingness to pay to increase supplier profit

Answer: (C)

Verified step by step guidance

1. Understand the concept of consumer surplus, which is the difference between what a consumer is willing to pay for a good or service and what they actually pay.
2. Recognize that a restaurant customer's willingness to pay reflects the maximum value they place on the supplier's products.
3. Analyze how offering products that closely match the restaurants' willingness to pay maximizes consumer surplus, as customers receive high value relative to the price paid.
4. Consider that limiting variety or reducing quality may decrease consumer surplus by either restricting choice or lowering perceived value, which can harm the supplier-customer relationship.
5. Conclude that setting prices above willingness to pay reduces consumer surplus and can lead to lost sales, so the best strategy is to align product offerings and prices with customers' willingness to pay to create the most value.