If consumers cannot resell products, how does this affect the measurement of consumer surplus in a market?

• A. Consumer surplus cannot be measured because resale is necessary for market transactions.
• B. Consumer surplus increases because consumers can sell products at higher prices.
• C. Consumer surplus is zero since consumers cannot benefit from purchasing products.
• D. Consumer surplus is accurately measured by the difference between willingness to pay and the market price.

Answer: (D)

Verified step by step guidance

1. Understand the concept of consumer surplus: it is the difference between what consumers are willing to pay for a good and what they actually pay in the market.
2. Recognize that consumer surplus is typically measured by the area under the demand curve and above the market price, representing the net benefit to consumers.
3. Consider the role of resale: if consumers cannot resell products, it means they cannot recover any part of their expenditure by selling the product later, but this does not affect their initial willingness to pay or the price they pay.
4. Since consumer surplus depends on the difference between willingness to pay and the market price, the inability to resell does not change this calculation; it only limits consumers' options after purchase.
5. Therefore, consumer surplus remains accurately measured by the difference between willingness to pay and the market price, regardless of whether resale is possible.