Multiple Choice
In the context of consumer surplus and willingness to pay, which statement best describes the choices available to consumers in the fast food market?
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5. Consumer and Producer Surplus; Price Ceilings and Floors
Consumer Surplus and Willingness to Pay
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Which of the following best describes the concept of 'willingness to pay' in microeconomics?
A
The difference between market price and production cost
B
The maximum price a consumer is willing to pay for a good or service
C
The minimum price a producer is willing to accept for a good or service
D
The total revenue earned by a business from selling goods
Verified step by step guidance1
Understand that 'willingness to pay' (WTP) is a concept related to consumer behavior in microeconomics.
Recognize that WTP represents the maximum amount of money a consumer is ready to spend to acquire a good or service, reflecting the value they place on it.
Differentiate WTP from other concepts such as market price, production cost, minimum acceptable price by producers, and total revenue, which relate to different economic agents or measures.
Recall that the difference between market price and production cost relates to producer surplus or profit, not willingness to pay.
Conclude that the best description of willingness to pay is 'the maximum price a consumer is willing to pay for a good or service.'
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