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

• A. The difference between what a consumer is willing to pay and what they actually pay for a good
• B. The price at which supply equals demand
• C. The total amount paid by all consumers in a market
• D. The cost of producing one more unit of a good

Answer: (A)

Verified step by step guidance

1. Understand the concept of willingness to pay (WTP), which is the maximum amount a consumer is ready to pay for a good or service.
2. Recognize that consumer surplus measures the benefit consumers receive when they pay less than their willingness to pay.
3. Express consumer surplus mathematically as the difference between willingness to pay and the actual price paid: \(\text{Consumer Surplus} = \text{WTP} - \text{Price Paid}\).
4. Note that consumer surplus is not related to the price where supply equals demand (equilibrium price), total amount paid by consumers, or production costs.
5. Conclude that the best description of consumer surplus is the difference between what a consumer is willing to pay and what they actually pay for a good.