Multiple Choice
In the market data approach for estimating the value of a house, what is typically used as the unit of comparison?
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5. Consumer and Producer Surplus; Price Ceilings and Floors
Consumer Surplus and Willingness to Pay
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Join thousands of students who trust us to help them ace their exams!Watch the first videoMultiple Choice
In microeconomics, what term describes the maximum amount you are willing to spend for an item?
A
Consumer surplus
B
Market price
C
Willingness to pay
D
Marginal cost
Verified step by step guidance1
Understand that the question asks for the term that represents the maximum amount a consumer is willing to pay for an item.
Recall that in microeconomics, the 'willingness to pay' (WTP) is defined as the highest price a consumer is ready to pay for a good or service, reflecting the value they place on it.
Differentiate 'willingness to pay' from other terms: 'consumer surplus' is the difference between willingness to pay and the actual price paid; 'market price' is the price at which goods are sold; 'marginal cost' is the cost of producing one additional unit.
Conclude that the term describing the maximum amount a consumer is willing to spend is 'willingness to pay'.
Remember that understanding willingness to pay helps analyze consumer behavior and market demand.
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