When a theme park offers a group rate discount, how does this affect consumer surplus for the group members?

• A. Consumer surplus increases because group members pay less than their maximum willingness to pay.
• B. Consumer surplus remains unchanged because the price is the same for all visitors.
• C. Consumer surplus decreases because group members pay more than their willingness to pay.
• D. Consumer surplus is eliminated because the group rate equals the willingness to pay.

Answer: (A)

Verified step by step guidance

1. Step 1: Understand the concept of consumer surplus. Consumer surplus is the difference between what a consumer is willing to pay for a good or service and what they actually pay. Mathematically, it can be expressed as \(\text{Consumer Surplus} = \text{Willingness to Pay} - \text{Price Paid}\).
2. Step 2: Analyze the effect of a group rate discount on the price paid by group members. A group rate discount means the price per person is lower than the standard individual price, so \(\text{Price Paid}\) decreases for group members.
3. Step 3: Consider how the willingness to pay compares to the discounted price. Since the group members pay less than their maximum willingness to pay, the difference \(\text{Willingness to Pay} - \text{Price Paid}\) increases.
4. Step 4: Conclude the impact on consumer surplus. Because the price paid decreases while willingness to pay remains the same, consumer surplus for group members increases.
5. Step 5: Verify that other options are inconsistent with the definition of consumer surplus. For example, consumer surplus cannot remain unchanged if the price changes, nor can it decrease if the price is lower than willingness to pay.