Question 4If the price of a good falls while supply remains unchanged, then total producer surplus will ____________.1 pointremain unchangeddecreaseWe can’t say.increase
Question
Question 4If the price of a good falls while supply remains unchanged, then total producer surplus will ____________.1 pointremain unchangeddecreaseWe can’t say.increase
Solution
The total producer surplus will decrease.
Here's why:
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Producer surplus is the difference between the price a producer is willing to accept for a good or service and the actual price they receive.
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When the price of a good falls, the price they receive is lower.
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Assuming supply remains unchanged, producers are still willing to supply the same amount at the original price.
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However, because the price they receive has fallen, the difference between the price they are willing to accept and the price they receive is smaller.
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Therefore, the total producer surplus decreases.
Similar Questions
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