In 2012, a severe drought led to an increase in the price of corn. Farmer Lyle was not affected by the drought. Comparing 2012 to the previous year in which there was no drought, Farmer Lyle's
A)consumer surplus increased.
B)producer surplus increased.
C)producer surplus increased and his consumer surplus increased.
D)consumer surplus decreased and his producer surplus increased.
E)supply of corn became perfectly elastic.

Question

Quizplus · Accepted Answer

Since Farmer Lyle was not affected by the drought, he was able to sell his corn at a higher price due to the increased demand and decreased supply of corn. This leads to an increase in producer surplus for Farmer Lyle. Consumer surplus may have decreased for buyers of corn, but this does not affect Farmer Lyle since he is a producer, not a consumer. Therefore, the correct choice is (B) producer surplus increased.

In 2012, a Severe Drought Led to an Increase in the Price