Which of the following statements is correct?
A) Consumer surplus equals the price paid for a good.
B) An increase in price decreases consumer surplus.
C) The consumer surplus from a good is always larger than the total benefit from the good.
D) The consumer surplus from a good or service must always equal producer surplus.
E) An increase in price has no effect on consumer surplus.

Question

Quizplus · Accepted Answer

Consumer surplus represents the difference between the maximum price a consumer is willing to pay for a good and the actual price paid. Therefore, an increase in price decreases consumer surplus. Option A is incorrect as consumer surplus is the difference between the maximum price a consumer is willing to pay and the actual price paid, so it will always be larger than the price paid. Option C is also incorrect as consumer surplus can be equal to or smaller than the total benefit from the good. Option D is incorrect as producer surplus represents the difference between the price received by the producer and the minimum price they are willing to accept, hence it may or may not equal consumer surplus. Option E is incorrect as an increase in price will always have an effect on consumer surplus, as explained above.

Which of the Following Statements Is Correct