Which statement best describes consumer surplus in relation to a buyer's willingness to pay?

• A. Consumer surplus is the price at which the good is sold in the market.
• B. Consumer surplus is the total amount a buyer spends on a good.
• C. Consumer surplus is the difference between what a buyer is willing to pay and what the buyer actually pays.
• D. Consumer surplus is the difference between the seller's cost and the market price.

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the concept of willingness to pay, which is the maximum amount a buyer is ready to pay for a good or service based on the value they place on it.
2. Step 2: Recognize that the market price is the actual amount the buyer pays to purchase the good.
3. Step 3: Define consumer surplus as the difference between the buyer's willingness to pay and the market price paid, representing the net benefit or gain to the consumer.
4. Step 4: Note that consumer surplus is not simply the price paid or the total amount spent, but rather the extra value the consumer receives beyond the price paid.
5. Step 5: Distinguish consumer surplus from producer surplus, which relates to the difference between the seller's cost and the market price, to avoid confusion.