Consider the Market for Socks

question 95

Multiple Choice

Consider the market for socks.The current price of a pair of plain white socks is $5.00.Two consumers,Jeff and Samir,are willing to pay $7.25 and $8.00,respectively,for a pair of plain white socks.Two sock manufacturers are willing to sell plain white socks for as little as $4.00 and $4.15 per pair.How much is total consumer surplus in this market?

• A) $2.25
• B) $3.00
• C) $0.75
• D) $5.25
• E) $15.25

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Definitions:

Consignee

The person or company that receives goods for sale, storage, or shipment on behalf of another, holding goods without taking ownership.

FOB Destination

A shipping term where the seller is responsible for the delivery of goods to a specific destination, absorbing all costs and risks until the goods are received by the buyer.

Perpetual Inventory System

A method of inventory management where updates to inventory records are made continuously as transactions occur.

Net Price Method

An accounting method where discounts are not recorded in the accounting records; instead, purchases are recorded at the net purchase price.