How can an increase in producer surplus occur?

An increase in producer surplus occurs when producers receive a higher price for their goods, which is accurately reflected in the choice that indicates increasing the price received for a good. Producer surplus is defined as the difference between the amount producers are willing to accept for a good or service versus what they actually receive.

When the price received for a good increases, all producers who were already willing to sell at lower prices can now gain additional surplus. This is particularly impactful because it incentivizes more production, as suppliers are motivated by the opportunity to earn higher profits. The overall result is that producer surplus expands, reflecting both existing producers benefitting from higher prices and potentially new producers entering the market due to improved profitability.

In contrast, choices that involve lowering consumer prices or raising the cost of inputs would likely compress the margins that producers experience, thus decreasing their surplus. Reducing the quantity supplied could also lead to a decrease in producer surplus by potentially limiting sales and therefore revenue.