Which of the following is true regarding comparison shopping for used vehicles in terms of consumer surplus and willingness to pay?

• A. Comparison shopping always results in consumers paying exactly their willingness to pay, leaving no consumer surplus.
• B. Comparison shopping allows consumers to find vehicles priced below their willingness to pay, increasing their consumer surplus.
• C. Comparison shopping decreases consumer surplus because consumers end up paying more than their willingness to pay.
• D. Comparison shopping has no effect on consumer surplus or willingness to pay.

Answer: (B)

Verified step by step guidance

1. Step 1: Understand the concept of willingness to pay (WTP), which is the maximum amount a consumer is ready to pay for a good or service based on the value they place on it.
2. Step 2: Define consumer surplus as the difference between the consumer's willingness to pay and the actual price paid, mathematically expressed as \(\text{Consumer Surplus} = \text{WTP} - \text{Price Paid}\).
3. Step 3: Recognize that comparison shopping involves looking at multiple sellers or options to find the best price, which can lead to paying a price lower than the consumer's WTP.
4. Step 4: Analyze how paying a price below WTP increases consumer surplus because the consumer gains additional value equal to the difference between WTP and the lower price.
5. Step 5: Conclude that comparison shopping does not eliminate consumer surplus; instead, it tends to increase consumer surplus by enabling consumers to find better deals below their maximum willingness to pay.