In 2012 a severe drought raised the price of corn. For a farmer in Canada who harvested a normal crop because the farm was not affected directly by the drought, the increase in the price of corn
A) increases the farmer's producer surplus.
B) decreases the farmer's producer surplus.
C) does not affect the producer surplus because this change is a movement along the farmer's supply curve and not a shift of the farmer's supply curve.
D) increases producer surplus only if the farmer's supply is completely inelastic.

Question

Quizplus · Accepted Answer

The increase in the price of corn raises the farmer's producer surplus because the farmer can sell the same quantity of corn at a higher price, thus increasing the difference between what they are willing to accept and what they actually receive.

In 2012 a Severe Drought Raised the Price of Corn