Suppose Mary is willing to pay up to $15,000 for a used Ford pick-up truck, but she finds one for $12,000. Her __________ is __________.

Question

Quizplus · Accepted Answer

Economic surplus is the benefit received from a transaction minus the cost. Mary's benefit is $15,000, but she only had to pay $12,000 for the truck. Therefore, her economic surplus is $3,000. Option A is incorrect because the benefit cannot be equal to the price paid, as the benefit is always greater or equal to the cost. Option B is incorrect because $15,000 is Mary's maximum willingness to pay, and not the cost. Option D is incorrect because Mary's economic surplus is $3,000, not $12,000.

Suppose Mary Is Willing to Pay Up to $15,000 for a Used