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Economics (AS & A Level) · May / June 2021 · Paper 12 · Question 11

9708Consumer and producer surplus

A private company achieves a producer surplus at the market equilibrium price. What might reduce the size of the private company's producer surplus?

  1. APrivate companies choose to prioritise profits over customer needs.
  2. BPrivate companies start to pay dividends out of profits.
  3. CThe government fixes the price of electricity below the market price.
  4. DThe private company supply curve becomes more elastic.

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Correct answer: D. The private company supply curve becomes more elastic.

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