Exhibit 6-7
-If supply is perfectly elastic,
A)producer surplus is equal to zero.
B)an increase in demand decreases producer surplus.
C)an upward shift of supply decreases producer surplus.
D)a downward shift of supply decreases producer surplus.
E)no output is produced.

Question

Exhibit 6-7 
-If supply is perfectly elastic,
A)producer surplus is equal to zero. 
B)an increase in demand decreases producer surplus. 
C)an upward shift of supply decreases producer surplus. 
D)a downward shift of supply decreases producer surplus. 
E)no output is produced.

Quizplus · Accepted Answer

When supply is perfectly elastic, the producer can sell any quantity they choose at the market price. This means that there is no difference between the minimum price the producer is willing to accept and the price they actually receive for each unit sold. As a result, producer surplus is zero.

Exhibit 6-7 -If Supply Is Perfectly Elastic