Consumer surplus refers to
A Difference between total utility and total expenditure
B Excess of price over willingness to pay
C Total utility from consumption
D Total satisfaction at equilibrium
Consumer surplus is the excess of total utility obtained from a good over the total amount actually paid for it.
The concept of consumer surplus was introduced by
A Alfred Marshall
B J.R. Hicks
C Paul Samuelson
D Lionel Robbins
Alfred Marshall introduced the concept to measure consumers’ gain from exchange.
Consumer surplus arises because
A Price is greater than utility
B Marginal utility declines
C Demand is perfectly elastic
D Income is constant
Due to diminishing marginal utility, consumers are willing to pay more for initial units than the market price.
Consumer surplus can be measured in terms of
A Price only
B Utility only
C Money
D Income
Marshall measured consumer surplus in monetary terms by comparing willingness to pay with actual price.
According to Marshall, consumer surplus equals
A Price × Quantity
B Total utility – Total expenditure
C Marginal utility – Price
D Income – Expenditure
Consumer surplus is the difference between total utility and total expenditure on a commodity.
Consumer surplus is maximum when
A Price is maximum
B Price is zero
C Marginal utility is zero
D Income is zero
When marginal utility becomes zero, total utility is maximum, giving maximum consumer surplus.
Consumer surplus is zero when
A Price is zero
B Marginal utility is zero
C Total utility equals total expenditure
D Demand is perfectly elastic
Consumer surplus is zero when consumers’ willingness to pay equals the market price.
Consumer surplus depends directly on
A Cost of production
B Marginal utility
C Price elasticity
D Income elasticity
Higher marginal utility relative to price increases consumer surplus.
A fall in price of a commodity leads to
A Decrease in consumer surplus
B No change in consumer surplus
C Increase in consumer surplus
D Negative consumer surplus
Lower price increases the gap between willingness to pay and price, raising consumer surplus.
Consumer surplus is greater when demand is
A Inelastic
B Elastic
C Perfectly elastic
D Unitary elastic
Inelastic demand implies consumers are willing to pay much more than price, increasing surplus.
Consumer surplus is minimal when demand is
A Perfectly elastic
B Inelastic
C Unitary elastic
D Perfectly inelastic
With perfectly elastic demand, willingness to pay equals price, leaving no surplus.
The graphical representation of consumer surplus is the area
A Below demand curve and above price line
B Above demand curve
C Below price line
D Under supply curve
Consumer surplus is shown as the area between demand curve and price line up to quantity consumed.
Consumer surplus is useful to government mainly in
A Price fixation
B Taxation policy
C Production planning
D Wage determination
Governments use consumer surplus to assess welfare effects of taxes and subsidies.
The concept of consumer surplus helps in measuring
A Producer efficiency
B Social welfare
C Cost of production
D Market supply
Consumer surplus indicates the welfare gain enjoyed by consumers.
Consumer surplus analysis assumes
A Ordinal utility
B Constant marginal utility of money
C Perfect competition only
D Variable income
Marshall’s analysis assumes marginal utility of money remains constant.
Consumer surplus is high for
A Luxury goods
B Necessaries
C Inferior goods
D Free goods
Necessaries yield high surplus as consumers are willing to pay much more than market price.
Which factor reduces consumer surplus?
A Fall in price
B Rise in income
C Increase in price
D Increase in demand
Rise in price reduces the difference between willingness to pay and actual price.
Consumer surplus becomes negative when
A Price < willingness to pay
B Price > willingness to pay
C Marginal utility is zero
D Income is constant
If price exceeds willingness to pay, consumers suffer loss instead of surplus.
Which situation gives zero consumer surplus?
A Perfectly elastic demand
B Inelastic demand
C Elastic demand
D Unitary elastic demand
Perfect elasticity means consumers pay exactly what they are willing to pay.
Consumer surplus is applicable mainly under
A Monopoly
B Perfect competition
C Oligopoly
D Monopolistic competition
The concept is most meaningful under perfect competition with uniform price.
Which of the following increases consumer surplus?
A Tax on commodity
B Subsidy on commodity
C Rise in price
D Fall in income
Subsidy reduces price, increasing consumer surplus.
The consumer surplus concept is criticised because it assumes
A Ordinal utility
B Constant MU of money
C Rational consumer
D Diminishing MU
MU of money may vary with income changes, making the assumption unrealistic.
Hicks criticised Marshall’s consumer surplus because utility is
A Cardinal
B Objective
C Subjective
D Monetary
Hicks argued utility is subjective and cannot be measured in money.
According to Hicks, consumer surplus is measured using
A Marginal utility
B Indifference curves
C Total expenditure
D Price elasticity
Hicks used indifference curve approach to measure consumer surplus.
Hicksian consumer surplus is more realistic because it
A Uses utils
B Avoids monetary measurement of utility
C Assumes constant MU of money
D Ignores preferences
Ordinal utility avoids unrealistic numerical measurement.
Which surplus measures gain to producers?
A Consumer surplus
B Total surplus
C Producer surplus
D Social surplus
Producer surplus measures difference between price received and minimum acceptable price.
Total surplus in a market equals
A Consumer surplus only
B Producer surplus only
C Consumer surplus + Producer surplus
D Profit + cost
Total surplus measures overall welfare gain in the market.
Consumer surplus is higher when
A Demand is perfectly elastic
B Demand is perfectly inelastic
C Demand is unitary elastic
D Demand is downward sloping
Perfectly inelastic demand implies high willingness to pay.
Which policy measure reduces consumer surplus but may raise government revenue?
A Subsidy
B Price ceiling
C Indirect tax
D Free distribution
Indirect taxes increase prices, reducing consumer surplus.
Consumer surplus helps in evaluating
A Inflation rate
B Welfare impact of price changes
C GDP growth
D Employment level
It helps assess gains or losses to consumers from price changes.
Consumer surplus is insignificant when goods are
A Necessaries
B Luxuries
C Comforts
D Perfect substitutes
Perfect substitutes yield little surplus as consumers switch easily.
The greater the elasticity of demand, the
A Greater the consumer surplus
B Smaller the consumer surplus
C Zero consumer surplus
D Negative consumer surplus
Elastic demand means willingness to pay is close to price.
Consumer surplus is widely used in
A Welfare economics
B Production theory
C Cost theory
D Growth theory
It is a core concept in welfare economics.
Consumer surplus exists because
A Consumers are irrational
B Price is constant
C Willingness to pay differs among units
D Income is unlimited
Different units give different levels of satisfaction.
Consumer surplus is affected by
A Changes in taste
B Changes in income
C Changes in price
D All of the above
All these factors influence willingness to pay and market price.
Which assumption makes consumer surplus less realistic?
A Rational consumer
B Diminishing MU
C Constant MU of money
D Stable preferences
MU of money usually changes with income.
Consumer surplus under perfectly competitive market is
A Zero
B Maximum
C Negative
D Constant
Uniform low price under competition yields high surplus.
Consumer surplus helps in comparing
A Two demand curves
B Welfare before and after policy
C Cost structures
D Supply conditions
It helps evaluate welfare impact of policy changes.
Which good generally gives maximum consumer surplus?
A Luxury goods
B Inferior goods
C Necessaries
D Comfort goods
Consumers value necessities highly relative to price.
Consumer surplus concept assumes
A Perfect knowledge of market
B Imperfect competition
C Price discrimination
D Monopoly power
Consumers are assumed to know prices and utilities.
A rise in indirect tax will
A Increase consumer surplus
B Reduce consumer surplus
C Not affect consumer surplus
D Eliminate surplus
Tax increases price paid by consumers.
Consumer surplus analysis is most useful in
A Short run only
B Long run only
C Partial equilibrium analysis
D General equilibrium analysis
It is mainly used in partial equilibrium welfare analysis.
Which curve is used to measure consumer surplus graphically?
A Supply curve
B Indifference curve
C Demand curve
D Cost curve
Demand curve reflects willingness to pay.
Consumer surplus is unaffected when
A Price changes
B Income changes
C Preferences change
D Quantity demanded remains zero
With zero consumption, no surplus arises.
Consumer surplus concept ignores
A Psychological satisfaction
B Monetary measurement
C Producer welfare
D Social welfare
It focuses on monetary valuation, not psychological aspects.
Consumer surplus is smallest for
A Essential goods
B Comfort goods
C Luxury goods
D Inferior goods
Consumers are less willing to pay high prices for luxuries.
Consumer surplus analysis assumes demand curve reflects
A Marginal cost
B Marginal utility
C Average cost
D Average utility
Demand curve represents marginal willingness to pay.
Which situation increases consumer surplus the most?
A Rise in price
B Fall in price
C Increase in tax
D Reduction in income
Fall in price increases surplus by widening gap between willingness to pay and price.
Consumer surplus is widely used to justify
A Price rise
B Monopoly pricing
C Public subsidies
D Wage cuts
Subsidies increase consumer surplus and social welfare.
Consumer surplus ultimately measures
A Profit
B Cost
C Consumer welfare
D National income
Consumer surplus reflects welfare gained by consumers from market transactions.