Which of the following best explains why consumer surplus arises in a market?

• A. Because the government subsidizes consumer purchases
• B. Because some consumers are willing to pay more for a good than the market price
• C. Because all consumers pay exactly what they are willing to pay
• D. Because producers always set prices above equilibrium

Answer: (B)

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.
2. Recognize that consumer surplus arises when some consumers value the good more than the market price, meaning their willingness to pay exceeds the price they pay.
3. Note that if all consumers paid exactly what they were willing to pay, there would be no consumer surplus because no one would gain extra benefit.
4. Understand that government subsidies or producers setting prices above equilibrium are not the primary reasons for consumer surplus; consumer surplus is about individual willingness to pay relative to the market price.
5. Therefore, the best explanation is that consumer surplus arises because some consumers are willing to pay more for a good than the market price.