If Sam is willing to pay $50 for one unit of good X, $30 for a second, $20 for a third, $8 for a fourth, and the market price is $10, then Sam's consumer surplus is:
A) $40 and he buys 1 unit of good X.
B) $60 and he buys 2 units of good X.
C) $70 and he buys 3 units of good X
D) $68 and he buys 4 units of good X.

Question

Quizplus · Accepted Answer

Sam's consumer surplus is the difference between what he is willing to pay and what he actually pays. For 3 units, he is willing to pay $50 + $30 + $20 = $100, but he pays 3 x $10 = $30, so the surplus is $100 - $30 = $70.

If Sam Is Willing to Pay $50 for One Unit