Multiple Choice
Which of the following factors can influence a consumer's willingness to pay for a service?
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5. Consumer and Producer Surplus; Price Ceilings and Floors
Consumer Surplus and Willingness to Pay
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Which term best describes the maximum amount a consumer is willing to pay for a good or service, given their economic position?
A
Market Price
B
Willingness to Pay
C
Consumer Surplus
D
Marginal Utility
Verified step by step guidance1
Understand the concept of 'Willingness to Pay' (WTP): it represents the maximum amount a consumer is ready to pay for a good or service based on their preferences and economic situation.
Recognize that 'Market Price' is the actual price at which the good or service is sold, which may be lower or higher than the consumer's willingness to pay.
Know that 'Consumer Surplus' is the difference between the consumer's willingness to pay and the market price, representing the net benefit to the consumer.
Identify that 'Marginal Utility' refers to the additional satisfaction or benefit a consumer gains from consuming one more unit of a good or service, not the maximum price they are willing to pay.
Conclude that the term describing the maximum amount a consumer is willing to pay, given their economic position, is 'Willingness to Pay'.
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