Question

Consumer surplus arises in a market because

a.the market price is higher than what some consumers are willing to pay for the product.
b.the market price is below what some consumers are willing to pay for the product.
c.at the current market price, quantity demanded is greater than quantity supplied.
d.at the current market price, quantity supplied is greater than quantity demanded.

Answer 1

Consumer surplus occurs when the market price is below what consumers are willing to pay, resulting in a benefit to consumers. It is part of the total surplus which is maximized at market equilibrium. Deadweight loss happens when total surplus is not maximized due to inefficient production quantity.

Step-by-step explanation:

Consumer surplus arises in a market because the market price is below what some consumers are willing to pay for the product. This means that consumers experience a benefit by paying less for a product than what they would have been prepared to pay, based on their preferences. The consumer surplus is calculated as the difference between what consumers are willing to pay and the actual market price at which they purchase the product. When a market is in equilibrium, the total surplus, which includes both consumer surplus and producer surplus, is maximized. A deadweight loss occurs when the economy is not producing at the equilibrium quantity, leading to a loss in total surplus.