When the price rises and the supply curve does not shift,the firms' producer surplus ________.When the price falls and the supply curve does not shift,the firms' producer surplus ________.
A) increases; decreases
B) decreases; increases
C) decreases; decreases
D) increases; increases
E) does not change; does not change

Question

Quizplus · Accepted Answer

Producer surplus increases when the price rises because firms are able to sell their goods at a higher price, leading to greater profitability. Conversely, when the price falls, producer surplus decreases because firms receive less money for their goods, reducing profitability.

When the Price Rises and the Supply Curve Does Not