Mike really enjoys Bitter Sweet coffee and is willing to pay $10 per cup. The retail price is $3. Which statement is correct?

Question

Quizplus · Accepted Answer

Since Mike is willing to pay $10 but only has to pay $3, his consumer surplus is $7 per cup. Option A is incorrect as the consumer surplus is not equal to the amount he is willing to pay. Option C is incorrect as it assumes that Mike is willing to pay an even higher amount, which is not stated in the question. Option D is incorrect as Mike is willing to pay more than the retail price, indicating that he is getting a good deal.

Mike Really Enjoys Bitter Sweet Coffee and Is Willing to Pay