Given a table showing the maximum willingness to pay for each unit of a good and the market price, how do you calculate the total consumer surplus?

• A. Sum the differences between each buyer's willingness to pay and the market price for all units purchased.
• B. Add the market price to each buyer's willingness to pay.
• C. Multiply the market price by the total quantity purchased.
• D. Subtract the total cost from the total revenue.

Answer: (A)

Verified step by step guidance

1. Identify the market price of the good from the problem statement or table.
2. List the maximum willingness to pay (WTP) for each unit of the good as given in the table.
3. For each unit purchased, calculate the difference between the willingness to pay and the market price using the formula: \(\text{Consumer Surplus per unit} = \text{WTP} - \text{Market Price}\).
4. Sum all the positive differences (only for units where WTP is greater than or equal to the market price) to find the total consumer surplus: \(\text{Total Consumer Surplus} = \sum (\text{WTP}_i - \text{Market Price})\) for all units \(i\) purchased.
5. Interpret the total consumer surplus as the net benefit consumers receive by paying less than their maximum willingness to pay for each unit.