Assume there are three hardware stores,each willing to sell one standard model hammer in a given time period.House Depot can offer their hammer for a minimum of $7.Lace Hardware can offer the hammer for a minimum of $10.Bob's Hardware store can offer the hammer at a minimum price of $13. Given the scenario described,if the market price of hammers decreased from $17 to $12:
A) producer participation in the market would increase.
B) producer participation in the market would decrease.
C) producer participation in the market would not be affected.
D) total producer surplus would remain unchanged.

Question

Quizplus · Accepted Answer

When the market price falls from $17 to $12, the profits of House Depot and Lace Hardware decrease, making them less likely to participate in the market. However, Bob's Hardware store can still earn a profit by selling at their minimum price of $13. Therefore, the overall producer participation in the market would decrease.

Assume There Are Three Hardware Stores,each Willing to Sell One