ECONOMICS
SUPPLY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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if the price of a good is too high
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if the price of a good is too low
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if the price is set at the equilibrium price
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None of the above
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Detailed explanation-1: -Producer surplus is a measure of producer welfare. It is shown graphically as the area above the supply curve and below the equilibrium price. Here the producer surplus is shown in gray. As the price increases, the incentive for producing more goods increases, thereby increasing the producer surplus.
Detailed explanation-2: -The size of the producer surplus and its triangular depiction on the graph increases as the market price for the good increases, and decreases as the market price for the good decreases.
Detailed explanation-3: -The producer surplus appears when the price that a seller would get for their goods at market value is higher than the minimum that they would be willing to accept for them. This surplus occurs based on the price that they incur to produce the product.
Detailed explanation-4: -A surplus occurs when there is some sort of disconnect between supply and demand for a product, or when some people are willing to pay more for a product than others.
Detailed explanation-5: -Whenever there is a surplus, the price will drop until the surplus goes away. When the surplus is eliminated, the quantity supplied just equals the quantity demanded-that is, the amount that producers want to sell exactly equals the amount that consumers want to buy.