Which statement regarding consumer surplus and willingness to pay for goods is most accurate?

• A. Consumer surplus is the difference between what a consumer is willing to pay for a good and what they actually pay.
• B. Willingness to pay is always equal to the market price of a good.
• C. Consumer surplus only exists when the price of a good is higher than the consumer's willingness to pay.
• D. Consumer surplus is the total amount a consumer spends on a good.

Answer: (A)

Verified step by step guidance

1. Step 1: Understand the concept of willingness to pay (WTP). WTP is the maximum amount a consumer is ready to pay for a good or service, reflecting the value they place on it.
2. Step 2: Define consumer surplus. Consumer surplus is the difference between the consumer's willingness to pay and the actual price they pay in the market.
3. Step 3: Express consumer surplus mathematically as: \(\text{Consumer Surplus} = \text{Willingness to Pay} - \text{Market Price}\), where this value is positive when the market price is less than the willingness to pay.
4. Step 4: Analyze the incorrect statements: WTP is not always equal to market price; consumer surplus does not exist when price is higher than WTP; and consumer surplus is not the total amount spent but the extra benefit received.
5. Step 5: Conclude that the most accurate statement is that consumer surplus is the difference between what a consumer is willing to pay and what they actually pay.