Multiple Choice
When deciding whether to purchase a new video game, which factor should be most important in determining your consumer surplus?
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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 is considered a final good or service in the context of consumer surplus and willingness to pay?
A
Steel used to manufacture automobiles
B
Flour sold to a bakery
C
Cotton purchased by a clothing manufacturer
D
A new car purchased by a consumer
Verified step by step guidance1
Understand the distinction between final goods and intermediate goods: Final goods are products purchased by the end consumer for personal use, while intermediate goods are used as inputs in the production of other goods.
Identify the examples given: Steel, flour, and cotton are all inputs used by manufacturers to produce other goods, so they are intermediate goods.
Recognize that a new car purchased by a consumer is the end product intended for final consumption, making it a final good.
Relate this to consumer surplus and willingness to pay, which apply to final goods and services because they reflect the value to the end consumer.
Conclude that among the options, only the new car purchased by a consumer qualifies as a final good or service in this context.
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