When market price increases, producer surplus increases because (1) producer surplus received by existing sellers increases and (2) new sellers enter the market.

Question

Quizplus · Accepted Answer

When market price increases, the producer surplus received by existing sellers increases as they are able to sell their products at a higher price. Additionally, new sellers may enter the market to take advantage of the higher prices, which also increases producer surplus overall. Therefore, both statements are true and support the conclusion that producer surplus increases when market price increases.

When Market Price Increases, Producer Surplus Increases Because (1) Producer