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 decreased from $17 to $12:
A)producer participation in the market would increase.
B)producer participation in the market would decrease.
C)producer participation in the market would not be affected.
D)total producer surplus would remain unchanged.

Question

Quizplus · Accepted Answer

As the market price decreases from $17 to $12, Bob's Hardware, which has a minimum price of $13, would no longer participate in the market, leading to a decrease in producer participation.

Assume There Are Three Hardware Stores in the Market for Hammers