If Prices Rise, What Happens to Producer Surplus (All Other

question 93

Multiple Choice

If prices rise, what happens to producer surplus (all other things being equal) ?

• A) It falls, because fewer people buy goods.
• B) It falls, because it encourages competition, which reduces profits.
• C) It rises, because each producer is getting more surplus per good sold.
• D) It stays the same, because the forces increasing the surplus counteract the forces reducing it.

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Definitions:

Demand Curve

A graphical representation showing how the quantity of a good or service demanded by consumers changes at different price levels.

Supply Curve

A graphical representation used in economics to show the relationship between the price of a good and the quantity of the good that suppliers are willing and able to supply at various prices.

Movement

A change or shift in position, location, or state, either physically, socially, economically, or politically.