Which of the following best describes consumer surplus in the context of willingness to pay?

• A. The maximum price a seller is willing to accept for a good
• B. The total amount paid by consumers for a good
• C. The difference between what a consumer is willing to pay for a good and what they actually pay
• D. The difference between the market price and the cost of production

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the concept of willingness to pay, which is the maximum amount a consumer is ready to pay for a good or service based on the value they place on it.
2. Step 2: Recognize that consumer surplus measures the benefit consumers receive when they pay less than their maximum willingness to pay.
3. Step 3: Define consumer surplus mathematically as the difference between the consumer's willingness to pay and the actual price paid: \(\text{Consumer Surplus} = \text{Willingness to Pay} - \text{Price Paid}\).
4. Step 4: Compare the given options to this definition to identify which one correctly describes consumer surplus.
5. Step 5: Conclude that consumer surplus is not about the seller's price, total amount paid, or production cost, but specifically the difference between willingness to pay and the actual payment.