Which of the following statements is true regarding consumers and consumer surplus?

• A. Consumer surplus is calculated as the sum of all prices paid by consumers.
• B. Consumer surplus is the difference between what consumers are willing to pay and what they actually pay.
• C. Consumer surplus is maximized when the market price equals the highest willingness to pay among all consumers.
• D. Consumers experience surplus only when the market price is higher than their willingness to pay.

Answer: (B)

Verified step by step guidance

1. Step 1: Understand the concept of consumer surplus. Consumer surplus is the difference between the maximum amount a consumer is willing to pay for a good or service and the actual price they pay in the market.
2. Step 2: Recognize that consumer surplus is not the sum of all prices paid by consumers. Instead, it measures the extra benefit or utility consumers receive because they pay less than what they were willing to pay.
3. Step 3: Analyze the relationship between market price and willingness to pay. Consumer surplus is positive only when the market price is less than the consumer's willingness to pay, meaning consumers gain surplus when they pay less than their maximum willingness to pay.
4. Step 4: Understand that consumer surplus is not maximized when the market price equals the highest willingness to pay. In fact, if the price equals the highest willingness to pay, only one consumer gains surplus, and others may gain none.
5. Step 5: Conclude that the true statement is: Consumer surplus is the difference between what consumers are willing to pay and what they actually pay.