Assume there are three hardware stores,each willing to sell one standard model hammer in a given time period.House Depot can offer their hammer for a minimum of $7.Lace Hardware can offer the hammer for a minimum of $10.Bob's Hardware store can offer the hammer at a minimum price of $13. Given the scenario described,if the market price of hammers decreased from $13 to $11:
A) total producer surplus would decrease from $9 to $5.
B) total producer surplus would increase from $5 to $9.
C) total producer surplus would decrease from $30 to $17.
D) total producer surplus would remain unchanged.

Question

Quizplus · Accepted Answer

The producer surplus is the difference between what producers are willing to accept and what they actually receive. Initially, at a market price of $13, the surpluses are: House Depot ($6), Lace Hardware ($3), and Bob's Hardware ($0), totaling $9. At a market price of $11, the surpluses are: House Depot ($4), Lace Hardware ($1), and Bob's Hardware ($0), totaling $5. Thus, the total producer surplus decreases from $9 to $5.

Assume There Are Three Hardware Stores,each Willing to Sell One