If prices rise, what happens to producer surplus (all other things being equal)?
A) It falls, because fewer people buy goods.
B) It falls, because it encourages competition, which reduces profits.
C) It rises, because each producer is getting more surplus per good sold.
D) It stays the same, because the forces increasing the surplus counteract the forces reducing it.

Question

Quizplus · Accepted Answer

If prices rise, producer surplus increases because each producer is able to charge a higher price for the goods they sell, which means they are receiving more surplus per good sold. The other choices are incorrect because they do not accurately describe the relationship between rising prices and producer surplus.

If Prices Rise, What Happens to Producer Surplus (All Other