Assume dairy farmers saw high profits the previous year and expanded their herds. Consider the market for milk. Ceteris paribus, what happened to dairy farmers' willingness-to-produce milk and to the amount of producer surplus, assuming demand held steady and the market sells at the equilibrium price?

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Quizplus · Accepted Answer

With an expansion of their herds, dairy farmers are more willing to produce milk due to the increased capacity for production. This increase in supply, assuming demand remains constant, typically leads to a lower equilibrium price but a higher quantity sold, increasing the total area of producer surplus.

Assume Dairy Farmers Saw High Profits the Previous Year and Expanded