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 increased from $8 to $12,total producer surplus would:
A)increase from $8 to $12.
B)increase by $4 for each producer.
C)increase by $4 for House Depot.
D)All of these statements are true.

Question

Quizplus · Accepted Answer

House Depot's producer surplus increases by $4 as the market price rises from $8 to $12, while Lace Hardware and Bob's Hardware do not gain any surplus since their minimum prices are above $8.

Assume There Are Three Hardware Stores in the Market for Hammers