An increase in supply will always
A)increase producer surplus.
B)decrease consumer surplus.
C)decrease producer surplus.
D)increase consumer surplus.

Question

Quizplus · Accepted Answer

An increase in supply will lead to a lower equilibrium price and a higher quantity supplied. This results in lower consumer prices and thus an increase in consumer surplus. Producer surplus may decrease as they receive a lower price for their goods, but this is not always the case as it depends on the extent of the increase in supply and the price elasticity of demand. Therefore, the correct answer is D, as an increase in supply will always increase consumer surplus.

An Increase in Supply Will Always