Consumer surplus: A. is the difference between the current market price and the cost of production for the firm. B. is the difference between the maximum amount a person is willing to pay for a good and its current market price. C. represents the maximum amount a person is willing to pay for a particular good. D. is the difference between the true value of a good and the amount a person is willing to pay for the good.

Question

Lilly Pope

Business

4 January, 00:15

Consumer surplus: A. is the difference between the current market price and the cost of production for the firm. B. is the difference between the maximum amount a person is willing to pay for a good and its current market price. C. represents the maximum amount a person is willing to pay for a particular good. D. is the difference between the true value of a good and the amount a person is willing to pay for the good.

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Kirby · Answer 1

B. is the difference between the maximum amount a person is willing to pay for a good and its current market price.

Explanation:

Consumer surplus is aeasure of customer benefits. It occurs when the price at which a consumer buys goods is less than what he was willing to pay. The extra money he was willing to pay is the surplus.

This concept is based on marginal utility (additional value a customer gets for consumption of extra unit of a good).

For Ecole if a customer is willing to pay $50 for a good whose market value is $30, the consumer surplus is $20.