Assume government policy increases the demand for corn.
A) The consumer surplus of corn buyers will increase.
B) The producer surplus of corn growers will decrease.
C) The producer surplus of corn growers will increase.
D) The producer surplus of corn growers will not change.

Question

Quizplus · Accepted Answer

An increase in demand for corn would lead to an increase in price (assuming supply remains constant), thus increasing the producer surplus for corn growers. The consumer surplus for corn buyers may or may not increase, depending on the size of the increase in price and the level of demand sensitivity. There is no reason to assume that the producer surplus of corn growers would decrease or not change.

Assume Government Policy Increases the Demand for Corn