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 increased from $8 to $11:
A) total producer surplus would increase to $5.
B) total producer surplus would decrease to $1.
C) total producer surplus would increase to $17.
D) total producer surplus would decrease to $7.

Question

Quizplus · Accepted Answer

When the market price increases from $8 to $11, all three hardware stores can now sell their hammers above their minimum price. House Depot can sell at $11 (a surplus of $4), Lace Hardware can sell at $11 (a surplus of $1), and Bob's Hardware store can sell at $13 (a surplus of $0). Therefore, the total producer surplus increases by $5 ($4 + $1 + $0).

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