Consumer surplus is best defined as the difference between:
Correct answer: B. The maximum willingness to pay and the price paid
- A. The price paid and the firm's total cost
- B. The maximum willingness to pay and the price paid
- C. The firm's revenue and its variable cost
- D. The quantity supplied and the quantity demanded
Explanation
Consumer surplus measures the benefit buyers receive when their willingness to pay exceeds the market price. Producer surplus, not consumer surplus, is linked to the difference between price and production cost.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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