34. A shopper purchases a shirt for $17 but the shopper was willing to pay $25 for it. What does this indicate?
Answer: D
The consumer surplus is $8.
The consumer surplus is the difference between what a consumer is willing to pay and what they actually pay. In this case, the shopper was willing to pay $25 but only paid $17, resulting in a consumer surplus of $8.
A) The producer surplus is $25.
This option is incorrect because producer surplus refers to the difference between the price at which producers are willing to sell a good and the actual price they receive. The scenario does not provide information about the producer’s costs or their willingness to sell, making this statement inaccurate.
B) The consumer surplus is $25.
This option is also incorrect. The consumer surplus is calculated as the difference between the maximum price the shopper was willing to pay ($25) and the actual price paid ($17). Thus, the consumer surplus is $8, not $25.
C) The producer surplus is $17.
This statement is incorrect as it misrepresents the concept of producer surplus. The figure $17 reflects the actual selling price of the shirt, but without information on the cost to the producer, we cannot conclude that the producer surplus is $17.
D) The consumer surplus is $8.
This option is correct. The consumer surplus is determined by subtracting the amount paid ($17) from the amount the shopper was willing to pay ($25), yielding a surplus of $8.
Conclusion
The correct answer is D, as it accurately reflects the calculation of consumer surplus in this scenario. All other options either misinterpret the concept of surplus or provide incorrect figures, highlighting the importance of understanding the definitions and calculations related to consumer and producer surplus.