Suppose that a customer's willingness-to-pay for a product is $79, and the seller's willingness-to-sell is $64. If the negotiated price is $65, producer surplus is greater than consumer surplus.

Question

Quizplus · Accepted Answer

Producer surplus is the difference between the willingness-to-sell and the actual selling price, which in this case is $64 - $65 = -$1. Since the negotiated price is below the seller's willingness-to-sell, the producer will experience a loss, and therefore producer surplus is 0 or negative. On the other hand, consumer surplus is the difference between the willingness-to-pay and the actual selling price, which in this case is $79 - $65 = $14. Since consumer surplus is positive, it is greater than (or at least equal to) producer surplus. Therefore, the statement is false.

Suppose That a Customer's Willingness-To-Pay for a Product Is $79