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 $10,then:
A)only House Depot would gain surplus by supplying hammers to the market.
B)only House Depot and Lace Hardware would gain surplus by supplying hammers to the market.
C)House Depot,Lace Hardware,and Bob's Hardware would all supply hammers to the market,but Bob's would lose surplus.
D)only House Depot and Bob's Hardware would supply hammers to the market.

Question

Quizplus · Accepted Answer

At a market price of $10, only Home Depot can supply hammers as they are the only one with a minimum price below $10. Both Lace Hardware and Bob's Hardware cannot supply at this price point due to their high minimum prices, so they will not gain any surplus. Home Depot, on the other hand, can still gain surplus as they can sell at $10 and still make a profit above their minimum price of $7. Therefore, only Home Depot gains surplus in this scenario.

Assume There Are Three Hardware Stores in the Market for Hammers