In an unregulated, competitive market, consumer surplus exists because some:
A) sellers are willing to take a lower price than the equilibrium price.
B) consumers are willing to pay more than the equilibrium price.
C) sellers will only sell at prices above equilibrium price (or actual price).
D) consumers are willing to make purchases only if the price is below the actual price.

Question

Quizplus · Accepted Answer

Consumer surplus exists in an unregulated, competitive market because some consumers are willing to pay more for a product than the market price (equilibrium price). As a result, they gain a surplus, which is the difference between what they are willing to pay and what they actually pay. This surplus represents a benefit to consumers, and therefore, it is known as consumer surplus. Choices A and C are incorrect because they suggest that sellers have some role to play in the creation of consumer surplus, which is not the case in an unregulated, competitive market. Choice D is incorrect because it suggests that consumers are only willing to buy a product if it is below the actual price (which is not a logical assumption).

In an Unregulated, Competitive Market, Consumer Surplus Exists Because Some