Suppose a consumer is willing to pay $20 for one unit of good X, $10 for a second, and $5 for a third, and the market price is $4. The consumer surplus is:
A) $16.
B) $6.
C) $1.
D) $23.

Question

Quizplus · Accepted Answer

The consumer surplus is the difference between what consumers are willing to pay and what they actually pay. For the first unit, the surplus is $16 ($20 - $4), for the second unit, it's $6 ($10 - $4), and for the third unit, it's $1 ($5 - $4). Adding these together gives a total consumer surplus of $23.

Suppose a Consumer Is Willing to Pay $20 for One