Assume there are three hardware stores, each willing to sell one standard model hammer in a given time period. House Depot could offer a hammer for a minimum of $7. Lace Hardware could offer a hammer for a minimum of $10. Bob's Hardware could offer a hammer for a minimum of $13.If the market price of hammers increased from $9 to $13:
A) House Depot's producer surplus would increase by $4.
B) Lace Hardware Hardware's producer surplus would increase by $3.
C) Bob's Hardware's producer surplus would remain unchanged.
D) All of these statements are true.

Question

Quizplus · Accepted Answer

Producer surplus is the difference between the market price and the minimum price at which producers are willing to sell a product. When the market price increases from $9 to $13, House Depot's producer surplus increases by $4 (from $2 to $6), Lace Hardware's producer surplus increases by $3 (from $0 to $3), and Bob's Hardware, which was not willing to sell at $9 but is willing at $13, now has a producer surplus of $0, indicating no change from its previous condition of not selling.

Assume There Are Three Hardware Stores, Each Willing to Sell