Final answer:
Producer surplus increases at higher prices due to producers selling goods above their minimum acceptable prices and an increase in domestic quantity supplied when barriers to trade are imposed, leading to higher prices and larger surplus area on a graph.
Step-by-step explanation:
The question revolves around the concept of producer surplus, which is a term in economics that refers to the difference between the amount a producer is willing to accept for a good versus what they actually receive in the market. In scenarios where consumer demand exceeds the supply, this drives the market prices up, and as a consequence, results in more suppliers entering the market. An increase in suppliers means more goods are available, and this raises competition, allowing production to eventually meet demand.
Specifically, two reasons lead to the increase in producer surplus when prices are higher. First, producers are able to sell goods at a price above their minimum acceptable price, which directly increases their surplus. Second, as described in the provided steps, when barriers to trade are introduced and imports are excluded, domestic suppliers can charge a higher price (PNoTrade). This not only increases the quantity supplied from Qs to Q but also elevates the prices, thereby expanding the area represented by the producer surplus on a supply and demand graph.
It's important to note that while the producer surplus increases, which benefits the producers, the consumer surplus typically decreases in such a scenario as consumers are paying higher prices for fewer goods, indicating a loss of welfare for the consumers.