Question 7.87 Choose the correct answerRead the following statements about consumer and producer surplus and select the correct one.

Question

BlackTom AI · Accepted Answer

Consumer surplus is the difference between what a buyer is willing to pay (their willingness to pay, WTP) and the price they actually pay. This is measured as the area under the demand curve and above the market price for all units purchased.

Relevant concepts:
- Consumer surplus (CS): WTP − price for each unit, summed over units; graphically, area between demand curve and price line.
- Producer surplus (PS): price − marginal (or supply) cost for each unit, summed; graphically, area between price line and supply curve.
- Profit: total revenue − total cost (includes fixed and variable costs). PS equals revenue minus variable cost (area above supply), so it is not generally the same as profit unless fixed costs are zero.
- Deadweight loss (DWL): the reduction in total surplus (CS + PS) relative to the efficient competitive outcome; it is a social loss from trades that do not occur, not merely a loss to one producer.

Step-by-step reasoning:
1. Identify the statement that matches the textbook definition of consumer surplus. Statement b states CS = consumers’ willingness to pay − what they actually pay, which matches the definition exactly.
2. Check other statements: a claims PS equals profit. In general PS = revenue − variable cost, whereas profit = revenue − (variable + fixed costs). They are equal only under special circumstances (zero fixed costs), so a is incorrect as a general statement.
3. Statement c claims DWL is the loss incurred by the producer for not selling more cars. DWL is the loss of total surplus (both consumers and producers) from forgone mutually beneficial trades; it is not solely the producer’s loss, so c is incorrect.
4. Statement d says all gains from trade are achieved at the firm’s profit-maximizing output and price. A monopoly profit-maximizing output generally produces DWL relative to competitive equilibrium, so not all gains from trade are realized; d is incorrect.

Why b is correct: it precisely captures the definition and measurement of consumer surplus.

Conclusion: The correct choice is b. This matches the provided answer.

Question 7.87 Choose the correct answerRead the following statements about consumer and producer surplus and select the correct one.单项选择题

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