Question:
A firm is operating in a perfectly competitive environment. A change in the market condition leads to an increase in the firm’s profit by an amount K. Which of the following describes the change in the Producer’s Surplus due to the above change in the market condition?
A firm is operating in a perfectly competitive environment. A change in the market condition leads to an increase in the firm’s profit by an amount K. Which of the following describes the change in the Producer’s Surplus due to the above change in the market condition?
Updated On: Oct 1, 2024
- The Producer’s Surplus increases by K
- The Producer’s Surplus increases by less than K but greater than 0
- The Producer’s Surplus changes but it is not possible to know the direction of the change
- The Producer’s Surplus doesn’t change
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The Correct Option is A
Solution and Explanation
The correct option is (A): The Producer’s Surplus increases by K
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