Question

In fashion shoe business, all fashion shoe makers use same kind of processed leathers. These processed leathers are sourced through market transactions (for simplicity, imagine all fashion shoe makers go to a processed leather bazaar monthly to get a month's supply of leathers). Which below describes a plausible scenario in which a particular maker could provide greater consumer surplus than other producers?

		A) Fashion shoe business is much more concentrated than processed leather business, granting the given producer high buyer bargaining power which lowers cost as well as price, thus generating higher consumer surplus
		B) With high market share, it manufactures at a much larger output level to lower per unit cost, which allows it to lower price and increase consumer surplus
		C) It offers fashion shoes with slightly higher perceived benefit than other producers, and charges a substantially higher price which can be partly offset by higher perceived benefit
		D) It actively adjusts price so that its price is always the same as that of competitors

Answer 1

B) With the high market share, manufactures much greater output level to lower per unit.. which helps to consumers surplus because when consumers get same product on every where but they get at lower price it helps to increase consumer surplus.