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

Question

Quizplus · Accepted Answer

Consumer surplus is the difference between the maximum price a person is willing to pay for a good or service and the actual retail price they pay. In this case, Mike is willing to pay $10 for a cup of Bitter Sweet coffee and the retail price is $3. Therefore, Mike's consumer surplus is $7 per cup (10-3 = 7). Option C is incorrect because if the seller raises the price to $13, it will exceed Mike's maximum willingness to pay and he may not make a sale. Option D is incorrect because Mike's consumer surplus is positive, which means he is getting a good deal on the coffee.

Mike Really Enjoys Bitter Sweet Coffee and Is Willing to Pay