To determine a product's selling price based on maximizing consumer surplus, which of the following should a firm primarily consider?

• A. The price at which total revenue equals total cost
• B. The lowest price offered by competitors
• C. The average cost of production for the product
• D. The highest price consumers are willing to pay for the product

Answer: (D)

Verified step by step guidance

1. Understand the concept of consumer surplus: it is the difference between what consumers are willing to pay for a product and what they actually pay.
2. Recognize that maximizing consumer surplus involves setting a price that captures the maximum willingness to pay by consumers, without exceeding it.
3. Identify that the highest price consumers are willing to pay represents the maximum value consumers place on the product, which is key to maximizing consumer surplus.
4. Compare this with other options: total revenue equals total cost relates to profit maximization, lowest competitor price relates to competitive pricing, and average cost relates to cost-based pricing, none of which directly maximize consumer surplus.
5. Conclude that the firm should primarily consider the highest price consumers are willing to pay to maximize consumer surplus.