Consumers are powerful because:

• A. they can force firms to produce at zero profit
• B. they determine the maximum price they are willing to pay for goods and services
• C. they always receive more consumer surplus than producers receive producer surplus
• D. they set the market price for all products directly

Answer: (B)

Verified step by step guidance

1. Understand the role of consumers in a market: Consumers influence demand by deciding how much of a good or service they are willing to buy at different prices.
2. Recognize that the maximum price consumers are willing to pay is called their 'willingness to pay,' which helps determine the demand curve.
3. Know that firms respond to consumer demand and willingness to pay by setting prices and production levels accordingly, but consumers do not directly set market prices.
4. Recall that consumer surplus is the difference between what consumers are willing to pay and what they actually pay, while producer surplus is the difference between the market price and the minimum price producers are willing to accept.
5. Conclude that consumers are powerful because their willingness to pay effectively sets the upper limit on prices, influencing firms' pricing and production decisions.