If Bill is willing to pay $10 for one good X, $8 for a second, and $6 for a third, and the market price is $5, then Max's consumer surplus is:
A) $24.
B) $18.
C) $9.
D) $6.

Question

If Bill is willing to pay $10 for one good X, $8 for a second, and $6 for a third, and the market price is $5, then Max's consumer surplus is:
A) $24.
B) $18.
C) ​$9.
D) ​$6.

Quizplus · Accepted Answer

Consumer surplus refers to the difference between the maximum price a consumer is willing to pay for a product and the actual market price. In this case, Max is willing to pay a maximum of $10 for one unit of X, but only has to pay the market price of $5. Therefore, his consumer surplus for that unit is $10 - $5 = $5. Similarly, for the second unit, his consumer surplus is $8 - $5 = $3 and for the third unit, his consumer surplus is $6 - $5 = $1. Adding them up, Max's total consumer surplus is $5 + $3 + $1 = $9. Therefore, the correct choice is C.

If Bill Is Willing to Pay $10 for One Good