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 increased from $8 to $11, total producer surplus would:
A) increase to $5.
B) decrease to $2.
C) increase to $17.
D) decrease to $7.

Question

Quizplus · Accepted Answer

Before the price increase, only House Depot would sell a hammer, with a producer surplus of $1 ($8 market price - $7 cost). After the price increase to $11, both House Depot and Lace Hardware would sell hammers, with surpluses of $4 ($11 - $7) and $1 ($11 - $10) respectively, totaling $5.

Assume There Are Three Hardware Stores, Each Willing to Sell