Consumer surplus arises because buyer tastes for a particular product differ, which means that:

• A. Some buyers are willing to pay more than the market price.
• B. Consumer surplus does not exist when tastes differ.
• C. All buyers pay exactly what they are willing to pay.
• D. The market price always equals the highest willingness to pay.

Answer: (A)

Verified step by step guidance

1. Understand the concept of consumer surplus: it is the difference between what a buyer is willing to pay for a good and what they actually pay in the market.
2. Recognize that buyers have different tastes and preferences, which means their willingness to pay varies across individuals.
3. Since the market price is typically a single price for all buyers, some buyers will have a willingness to pay higher than this market price.
4. These buyers who are willing to pay more than the market price gain consumer surplus, as they pay less than their maximum willingness to pay.
5. Therefore, consumer surplus arises because some buyers value the product more than the market price, not because all buyers pay exactly what they are willing to pay or because the market price equals the highest willingness to pay.