Assume there are three hardware stores in the market for hammers and that all three markets produce a single,standard model hammer.House Depot is an enormous mass producer of hammers and can offer a hammer for sale for a minimum of $7.Lace Hardware is a franchise and can offer the hammer for sale for a minimum of $10.Bob's Hardware store is a family owned and operated,independent hardware store and can offer hammers at a minimum price of $13.
Given the scenario described,if the market price of hammers increased from $9 to $13:
A)producer surplus would increase for each producer.
B)producer surplus would increase only for House Depot.
C)producer surplus would remain unchanged for Bob's Hardware.
D)producer surplus would increase by $4 for Lace Hardware.

Question

Quizplus · Accepted Answer

Bob's Hardware would start selling at $13, so their producer surplus would remain unchanged as they were not selling at the previous market price of $9.

Assume There Are Three Hardware Stores in the Market for Hammers