Final answer:
When the price of a product increases by $10 and cost of production remains unchanged, the producer surplus increases. This is because the surplus is the difference between the price received and the price a firm is willing to accept. An increased price results in a higher profit margin and a larger producer surplus.
Step-by-step explanation:
When the price of a product goes up by $10, as a seller, your producer surplus increases. Producer surplus is the difference between the price for which producers are willing to sell a product and the price they actually receive. If the cost of production remains the same but you can sell the product for an additional $10, you extract more surplus or profit from each sale, since the increase in price transfers more economic welfare from consumers to producers.
For instance, if the initial selling price of the pizza is $15 and it goes up by $10 to $25, assuming the cost of making the pizza remains unchanged, the additional $10 is added to your producer surplus for each pizza sold. This is because the cost of production and the desired profit are what usually determine the price a firm sets for a product. So if the cost of production remains the same and the selling price increases, the desired profit margin expands, boosting the producer surplus.
In a market scenario, an increased price can lead to an increased quantity supplied, assuming demand remains stable, further increasing the total producer surplus. This situation can be visually represented in supply and demand curves, where you would see that as the price moves from the initial price to the higher price, the area indicative of producer surplus on the graph would expand.