14. A shopper purchases a shirt for $17, but the shopper was willing to pay $25 for it. What does this indicate?
Answer: C
The consumer surplus is $8.
Consumer surplus is defined as the difference between what a consumer is willing to pay for a good and what they actually pay. In this case, the shopper was willing to pay $25 for the shirt but only paid $17, resulting in a consumer surplus of $8.
A) The consumer surplus is $25.
This option incorrectly states the amount of consumer surplus. While the shopper was willing to pay $25, the actual surplus is calculated as the difference between the willingness to pay and the purchase price, which is $8, not $25.
B) The producer surplus is $17.
This option is incorrect because producer surplus refers to the difference between the price at which producers are willing to sell a product and the actual selling price. The $17 represents the price paid by the consumer, not any surplus for the producer.
C) The consumer surplus is $8.
This option is correct as it accurately reflects the consumer surplus calculation. The shopper was willing to pay $25 but paid only $17, yielding a surplus of $8, which represents the benefit the consumer gains from the transaction.
D) The producer surplus is $25.
This option is incorrect because it misrepresents the concept of producer surplus. The producer surplus is not determined by the consumer's willingness to pay, but rather by the difference between the cost of production and the selling price, which is not provided in this scenario.
Conclusion
The correct answer, C, clearly identifies the consumer surplus as $8, accurately reflecting the shopper's benefit from the transaction. Options A, B, and D misinterpret the definitions of consumer and producer surplus, demonstrating a lack of understanding of these economic concepts. Thus, C is the only option that correctly applies the principles of consumer surplus in this situation.