Asked by Shahd Ajlani on Jul 25, 2024
Verified
A competitive market for cell phone chargers is in equilibrium.If the price temporarily falls below the equilibrium price:
A) producer surplus will rise.
B) producer surplus will fall.
C) the change in producer surplus is indeterminate.
D) there will be no change in producer surplus.
Producer Surplus
The discrepancy between what sellers are prepared to accept for a product or service and the real price they get.
Equilibrium Price
The price at which the quantity of a good or service supplied matches the quantity demanded, leading to market stability where there is no excess supply or demand.
- Identify the connection between movements in the supply curve, price fluctuations, and producer surplus.
Verified Answer
ZI
Ziarul IslamJul 29, 2024
Final Answer :
B
Explanation :
If the price falls below the equilibrium price, the quantity demanded will exceed the quantity supplied, resulting in a shortage. In a competitive market, producers will respond to the shortage by raising prices, which will eventually restore the market to equilibrium. In this situation, producers will have to sell their products at a lower price, resulting in a decrease in producer surplus.
Learning Objectives
- Identify the connection between movements in the supply curve, price fluctuations, and producer surplus.