In the context of consumer surplus and willingness to pay, if a company's ad is shown to a consumer based on keyword selection, what does this most likely indicate about the consumer?

• A. The consumer's consumer surplus is zero for products related to the keywords.
• B. The consumer will always purchase the product regardless of price.
• C. The consumer has a higher willingness to pay for products related to the selected keywords.
• D. The company does not consider the consumer's preferences when showing ads.

Answer: (C)

Verified step by step guidance

1. Understand the concept of willingness to pay (WTP): it represents the maximum amount a consumer is ready to pay for a product or service.
2. Recognize that companies use keyword selection in ads to target consumers who are more likely interested in related products, implying these consumers have a higher WTP for those products.
3. Recall that consumer surplus is the difference between what a consumer is willing to pay and the actual price paid; a higher WTP suggests potential positive consumer surplus, not zero.
4. Analyze the options: if an ad is shown based on keywords, it indicates the company believes the consumer's preferences align with those products, contradicting the idea that preferences are not considered.
5. Conclude that showing ads based on keyword selection most likely indicates the consumer has a higher willingness to pay for products related to those keywords.