Buying new furniture for your home would increase which of the following, assuming you value the furniture more than its market price?

• A. Your marginal cost of production
• B. Your consumer surplus
• C. The producer's willingness to pay
• D. The equilibrium price in the furniture market

Answer: (B)

Verified step by step guidance

1. Step 1: Understand the concept of consumer surplus. Consumer surplus is the difference between what a consumer is willing to pay for a good and what they actually pay. It measures the net benefit to the consumer from purchasing the good.
2. Step 2: Analyze the scenario: Buying new furniture increases your satisfaction or utility because you value the furniture more than its market price. This means your willingness to pay is higher than the price you pay.
3. Step 3: Recognize that your marginal cost of production is not relevant here because you are a consumer, not a producer. Marginal cost refers to the cost of producing one more unit of a good.
4. Step 4: Understand that the producer's willingness to pay is unrelated to your purchase decision; it reflects the minimum price producers are willing to accept, not the consumer's benefit.
5. Step 5: Realize that the equilibrium price in the furniture market is determined by overall supply and demand and is not directly increased by your individual purchase. Therefore, the increase in your consumer surplus is the correct effect of buying furniture you value more than its price.