Multiple Choice
If buyer demand for branded athletic footwear is projected to grow, what is the most likely effect on consumer surplus in the market, assuming supply remains unchanged?
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5. Consumer and Producer Surplus; Price Ceilings and Floors
Consumer Surplus and Willingness to Pay
Multiple Choice
Which of the following best describes how consumer surplus is related to a firm's decision to provide an assortment of products for consumers?
A
An assortment of products reduces consumer surplus by raising the market price for all goods.
B
Providing more product choices always decreases consumer surplus because consumers become confused.
C
Consumer surplus is unaffected by the number of products offered in the market.
D
Offering a variety of products allows consumers to find options closer to their willingness to pay, increasing consumer surplus.
Verified step by step guidance1
Understand the concept of consumer surplus: it is the difference between what consumers are willing to pay for a good or service and what they actually pay.
Recognize that when a firm offers a variety of products, consumers have more options to choose from, which increases the likelihood that they find a product that closely matches their preferences and willingness to pay.
Analyze how a better match between consumer preferences and product offerings can increase consumer surplus because consumers derive more satisfaction without necessarily paying more.
Consider that offering more product choices does not inherently raise market prices for all goods; instead, it can enhance consumer welfare by providing tailored options.
Conclude that the relationship between product variety and consumer surplus is positive because variety allows consumers to maximize their surplus by selecting products that better fit their needs.
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