Which of the following best describes consumer surplus in relation to a buyer's willingness to pay for a good?

• A. Consumer surplus is the difference between what a buyer is willing to pay and what the buyer actually pays.
• B. Consumer surplus is the total amount paid by all buyers in a market.
• C. Consumer surplus is the difference between the market price and the seller's cost of production.
• D. Consumer surplus is the sum of producer surplus and total revenue.

Answer: (A)

Verified step by step guidance

1. Step 1: Understand the concept of willingness to pay (WTP), which is the maximum amount a buyer is ready to pay for a good or service based on the value they place on it.
2. Step 2: Recognize that the actual price paid by the buyer is often less than or equal to their willingness to pay.
3. Step 3: Define consumer surplus as the difference between the buyer's willingness to pay and the actual price paid, representing the net benefit or gain to the consumer.
4. Step 4: Note that consumer surplus is not the total amount paid by buyers, which is simply the market price multiplied by quantity purchased.
5. Step 5: Distinguish consumer surplus from producer surplus and total revenue, as consumer surplus specifically measures the benefit to buyers, not sellers or total market transactions.