In a supply-and-demand graph, producer surplus can be pictured as the:
A) vertical intercept of the supply curve.
B) area between the demand curve and the supply curve to the left of equilibrium output.
C) area under the supply curve to the left of equilibrium output.
D) area under the demand curve to the left of equilibrium output.
E) area between the equilibrium price line and the supply curve to the left of equilibrium output.

Question

Quizplus · Accepted Answer

Producer surplus is the measure of how much producers gain from a transaction. It is calculated as the difference between the market price and the cost of producing the good. In a supply-and-demand graph, this can be pictured as the area between the equilibrium price line (the price at which quantity supplied equals quantity demanded) and the supply curve to the left of equilibrium output. This represents the amount that producers are willing and able to sell at a given price, but which they are not selling because the price is higher than the equilibrium price.

In a Supply-And-Demand Graph, Producer Surplus Can Be Pictured as The