Which of the following best explains why consumer surplus is higher for foods that are considered 'cheapest' by consumers?

• A. Because the market price is much lower than most consumers' willingness to pay for these foods.
• B. Because cheap foods are always of lower quality, leading to lower demand.
• C. Because the government sets a price ceiling on all cheap foods.
• D. Because producers always sell cheap foods at a loss to attract customers.

Answer: (A)

Verified step by step guidance

1. Step 1: Understand the concept of consumer surplus. Consumer surplus is the difference between what consumers are willing to pay for a good and what they actually pay. Mathematically, it can be expressed as \(\text{Consumer Surplus} = \text{Willingness to Pay} - \text{Market Price}\) for each unit purchased.
2. Step 2: Recognize that when a food item is considered 'cheap' by consumers, it means the market price is relatively low compared to their willingness to pay. This creates a larger gap between willingness to pay and the actual price.
3. Step 3: Analyze why a lower market price relative to willingness to pay increases consumer surplus. Since consumer surplus accumulates over all units purchased, a lower price means consumers gain more surplus because they pay less than what they value the good at.
4. Step 4: Evaluate the incorrect options: lower quality leading to lower demand does not necessarily increase consumer surplus; government price ceilings or producers selling at a loss are specific market interventions that are not generally true for all cheap foods.
5. Step 5: Conclude that the best explanation is that consumer surplus is higher for cheap foods because the market price is much lower than most consumers' willingness to pay, maximizing the difference that defines consumer surplus.