Assume there are three hardware stores in the market for hammers and that all three markets produce a single,standard model hammer.House Depot is an enormous mass producer of hammers and can offer a hammer for sale for a minimum of $7.Lace Hardware is a franchise and can offer the hammer for sale for a minimum of $10.Bob's Hardware store is a family owned and operated,independent hardware store and can offer hammers at a minimum price of $13.
Given the scenario described,if the market price of hammers was $13,then total producer surplus would be:
A)$9.
B)$30.
C)$17.
D)$7.

Question

Quizplus · Accepted Answer

The producer surplus is calculated as the difference between the market price and the minimum price each store is willing to accept, summed across all stores. House Depot has a surplus of $6 ($13 - $7), Lace Hardware has a surplus of $3 ($13 - $10), and Bob's Hardware has no surplus ($13 - $13). Total producer surplus is $6 + $3 + $0 = $9.

Assume There Are Three Hardware Stores in the Market for Hammers