National Economics Challenge Practice Test

Consumer surplus refers to the economic concept that measures the benefit or welfare that consumers receive when they are able to purchase a product at a price lower than the maximum price they are willing to pay for it. This difference represents the extra utility or satisfaction that consumers gain from the transaction.

When consumers are willing to pay a higher price for a good or service than what they actually pay, the consumer surplus is the measure of that savings. For example, if a consumer is willing to pay $100 for a concert ticket but is able to buy it for $70, the consumer surplus is $30. This surplus illustrates the value consumers receive beyond the actual monetary cost, contributing to their overall welfare and satisfaction in the market.

In contrast, the other choices relate to different economic concepts that do not accurately capture the essence of consumer surplus. The total cost of production minus profit deals with company financing, excess supply describes market conditions without addressing consumer welfare, and overall profit margins refer to business revenue rather than the benefits experienced by consumers.