Multiple Choice
Which of the following is a benefit of instant communication and sales for consumers?
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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 consumer surplus?
A
The difference between what a consumer is willing to pay for a good and what the consumer actually pays
B
The total amount paid by consumers for a good or service
C
The amount by which producer surplus exceeds consumer surplus
D
The difference between the market price and the cost of production for a firm
Verified step by step guidance1
Understand the concept of consumer surplus: it measures the benefit or gain a consumer receives when they pay less for a good than the maximum amount they are willing to pay.
Recall that consumer surplus is calculated as the difference between the consumer's willingness to pay and the actual market price paid.
Recognize that the total amount paid by consumers is simply the market price multiplied by quantity, which is not consumer surplus but total expenditure.
Note that producer surplus relates to the difference between the market price and the cost of production, which is distinct from consumer surplus.
Conclude that the best description of consumer surplus is: 'The difference between what a consumer is willing to pay for a good and what the consumer actually pays.'
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