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Consumer Surplus and Maximizing Profits

Determine whether each of the following statements is true or false. Indicate why.
A. Consumer surplus exists if an individual consumer is able to buy something for less than the maximum amount they are willing to pay.
B. Consumer surplus is the value of purchased goods and services and equals the amount paid to sellers.
C. A firm can enhance profits by charging each customer a per-unit fee equal to marginal cost, plus a fixed fee equal to the amount of consumer surplus generated at that per-unit fee.
D. The optimal bundle price is a single lump sum amount equal to the total area under the demand curve at that point.
E. If exact information about the value of each individual product for each individual consumer was available, the firm could earn maximum profits by precisely tying the price charged to the marginal value derived by each customer.

Solution Preview

A. Consumer surplus exists if an individual consumer is able to buy something for less than the maximum amount they are willing to pay.

* TRUE. The consumer surplus (sometimes named consumers' surplus) is the utility for consumers by being able to purchase a product for a price that is less than the price most that they would be willing to pay.

B. Consumer surplus is the value of purchased goods and services and equals the amount paid to ...

Solution Summary

The following posting answers true and false questions about consumer surplus and profits. Explanations are given.

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