market forces will incentivize sellers to come in and produce more. If the price is too low, additional buyers will bid up the price. These activities keep the equilibrium level in relative balance over time.
Producer surplusis the producer’s gain from exchange. The producer surplus is the area above the supply curve but below the equilibrium price and up to the quantity demand. Let us consider the effect of a new after-tax selling price of $7.50: The price would be $7.50 with a quantity de...