In the context of consumer surplus and willingness to pay, if a consumer is highly satisfied with a product, how does this typically affect the number of new clients they are likely to refer?

• A. They are unlikely to refer any new clients, as satisfaction does not impact referrals.
• B. They will only refer new clients if their willingness to pay is below market price.
• C. They will refer fewer new clients, decreasing overall consumer surplus.
• D. They are likely to refer more new clients, increasing overall consumer surplus.

Answer: (D)

Verified step by step guidance

1. Understand the concept of consumer surplus: it is the difference between what a consumer is willing to pay for a good or service and what they actually pay.
2. Recognize that a highly satisfied consumer typically has a high willingness to pay, indicating they value the product more than the market price.
3. Connect satisfaction and willingness to pay to consumer behavior: satisfied consumers are more likely to share positive experiences and recommend the product to others.
4. Realize that referrals from satisfied consumers can lead to more new clients, which can increase the overall consumer surplus in the market by expanding the number of transactions where consumers gain surplus.
5. Conclude that higher satisfaction generally leads to more referrals, which positively impacts consumer surplus, rather than decreasing it or having no effect.