Suppose that a customer's willingness-to-pay for a product is $5, and the seller's willingness-to-sell is $2. If the negotiated price is $3, producer surplus is greater than consumer surplus.

Question

Quizplus · Accepted Answer

Producer surplus is the difference between the price the seller actually receives and the minimum amount they are willing to accept, which in this case is $3 - $2 = $1. Consumer surplus is the difference between the maximum amount the consumer is willing to pay and the price they actually pay, which is $5 - $3 = $2. Therefore, consumer surplus is greater than producer surplus.

Suppose That a Customer's Willingness-To-Pay for a Product Is $5