Final answer:
An increase in demand for garlic bread, potentially due to a successful advertising campaign, would cause a rightward shift in the demand curve, leading to a higher equilibrium price and quantity, subsequently increasing the producer surplus as suppliers receive a higher price for a larger quantity.
Step-by-step explanation:
When a successful advertising campaign increases demand for garlic bread, the demand curve shifts to the right. This means consumers want to buy more garlic bread at every price. The new equilibrium price and quantity would both be higher in a competitive market. Due to this change, the producer surplus, which represents the difference between what producers are willing to sell a product for and the price they actually receive, would increase. This is because producers are now selling a larger quantity at a higher price. However, if the market response also involves an increase in quantity supplied due to the higher price incentivizing more production, the exact change in producer surplus would depend on factors like the cost of production and the elasticity of supply.
In the case of a monopolistic competitor experiencing an increase in demand, the firm can raise its price and increase the quantity supplied. The price increase might not be proportionate to the shift in demand because the monopolistic competitor has some degree of market power and faces a downward-sloping demand curve. Consequently, its increased quantity supplied does not necessarily happen at the lowest possible cost, affecting producer surplus.
If barriers to trade are imposed and the price rises due to exclusion of imports, domestic quantity supplied will increase and price will be higher at the new equilibrium, leading to an increase in producer surplus. Producer surplus is represented graphically by the area above the supply curve and below the price level up to the quantity sold. An increase in quantity sold at a higher price will expand this area, reflecting an increase in producer surplus.