Question

An individual's consumer surplus from some product can be eliminated entirely by:

1. raising the price until very few units are bought.

2. charging a price for each unit that is equal to the individual's marginal value for each unit.

3. raising the price until zero units are purchased.

Select one:

A.

1 only

B.

2 only

C.

3 only

D.

2 or 3

E.

1 or 2, but not 3.

Answer 1

Ans. D. 2 or 3

Consumer Surplus means when consumer is able to or willing to pay the price of any product more than it's market price which is current market price.

So, here option 2. talks about price equal to marginal value of individual for each unit. So it need to be eliminated entirely.

Option 3. talks about raising price until zero units are purchased which has no meaning related to consumer surplus definition. So this option 3. also need to be eliminated entirely.

Option 1. is relatable to consumer surplus because if the price is raising until few units. So, option 1. cannot be eliminated.