Learning Path
Question & Answer
Choose the Best Answer
Producer surplus increases as prices increase, allowing producers to earn more on each unit sold.
Producer surplus decreases because the quantity supplied decreases at higher prices.
Producer surplus remains unchanged regardless of price changes.
Producer surplus is irrelevant to the law of supply.
Understanding the Answer
Let's break down why this is correct
When the price of a good goes up, producers can sell each unit for more than the lowest price they would accept. Other options are incorrect because Some think a higher price makes producers supply less; It is not true that price changes do not affect surplus.
Key Concepts
Demand and Supply Basics
medium level question
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Deep Dive: Demand and Supply Basics
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Definition
Demand and supply basics cover the fundamental concepts related to the quantities of a product that consumers are willing and able to purchase (demand) and the quantities that suppliers are willing to offer (supply) at different price levels. The law of demand and supply explains the inverse relationship between price and quantity demanded or supplied, leading to the formation of demand and supply curves.
Topic Definition
Demand and supply basics cover the fundamental concepts related to the quantities of a product that consumers are willing and able to purchase (demand) and the quantities that suppliers are willing to offer (supply) at different price levels. The law of demand and supply explains the inverse relationship between price and quantity demanded or supplied, leading to the formation of demand and supply curves.
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