Assume there are three hardware stores, each willing to sell one standard model hammer in a given time period. House Depot could offer a hammer for a minimum of $7. Lace Hardware could offer a hammer for a minimum of $10. Bob's Hardware could offer a hammer for a minimum of $13.If the market price of hammers decreased from $17 to $12:
A) producer participation in the market would increase.
B) producer participation in the market would decrease.
C) producer participation in the market would not be affected.
D) total producer surplus would remain unchanged.

Question

Quizplus · Accepted Answer

When the market price of hammers decreases from $17 to $12, Bob's Hardware, which could offer a hammer for a minimum of $13, would no longer participate because the market price is below their minimum offer price. This leads to a decrease in producer participation in the market.

Assume There Are Three Hardware Stores, Each Willing to Sell