From the viewpoint of the consumer buying process, what does consumer surplus represent?

• A. The total amount a consumer spends on all goods and services
• B. The profit earned by firms from selling goods to consumers
• C. The difference between what a consumer is willing to pay for a good and what they actually pay
• D. The market price of a good minus its production cost

Answer: (C)

Verified step by step guidance

1. Understand that consumer surplus is a concept in microeconomics that measures the benefit or gain a consumer receives when they pay less for a good or service than the maximum amount they are willing to pay.
2. Recognize that the consumer's willingness to pay represents the maximum price at which they value the good, reflecting their perceived utility or satisfaction from the good.
3. Identify the actual price paid by the consumer, which is typically the market price of the good or service.
4. Calculate consumer surplus as the difference between the consumer's willingness to pay and the actual price paid, expressed as: \[\text{Consumer Surplus} = \text{Willingness to Pay} - \text{Price Paid}\]
5. Interpret consumer surplus as a measure of the extra satisfaction or utility the consumer gains from purchasing the good at a price lower than their maximum willingness to pay.