If a firm enjoys producer surplus in perfectly competitive Market A of $1000 and would enjoy producer surplus in perfectly competitive Market B of $1200,the firm would consider moving to Market B if
A) fixed costs are greater than $100 in Market A.
B) fixed costs are less than $200 in Market B.
C) fixed costs are less than $300 but greater than $200 in Market B.
D) fixed costs in Market B are less than the fixed costs in Market A plus $200.

Question

Quizplus · Accepted Answer

The firm would consider moving to Market B if the increase in producer surplus ($200) outweighs the difference in fixed costs. If fixed costs in Market B are less than the fixed costs in Market A plus $200, the move is financially beneficial, ensuring the firm still enjoys a net gain.

If a Firm Enjoys Producer Surplus in Perfectly Competitive Market