Which of the following best describes an advantage of paid search marketing in the context of consumer surplus and willingness to pay?

• A. It eliminates the need for firms to consider consumer surplus when setting prices.
• B. It enables firms to reach consumers actively searching for their products, increasing the likelihood of matching with those willing to pay more.
• C. It allows firms to target consumers who have a higher willingness to pay, potentially increasing consumer surplus.
• D. It guarantees that all consumers will pay the maximum price they are willing to pay.

Answer: (B)

Verified step by step guidance

1. Step 1: Understand the concept of consumer surplus, which is the difference between what consumers are willing to pay for a good or service and what they actually pay.
2. Step 2: Recognize that paid search marketing targets consumers who are actively searching for specific products, indicating a higher likelihood that these consumers have a clear willingness to pay.
3. Step 3: Analyze how reaching consumers with a higher willingness to pay through targeted advertising can increase the chances of matching products with consumers who value them more, potentially increasing sales efficiency.
4. Step 4: Note that paid search marketing does not eliminate the need to consider consumer surplus when setting prices; rather, it helps firms identify and reach consumers with varying willingness to pay.
5. Step 5: Conclude that the main advantage of paid search marketing in this context is its ability to connect firms with consumers actively searching for their products, thereby increasing the likelihood of matching with those willing to pay more, which can improve market outcomes.