The diagram below shows the demand and supply curves in a perfectly competitive market.
FIGURE 12-5
-Refer to Figure 12-5. In the free-market equilibrium, producer surplus is shown by the area
A) P3P2E.
B) P1P2E.
C) P1P3E.
D) 1 +2.
E) 1 + 2 + 3 + 4.

Question

The diagram below shows the demand and supply curves in a perfectly competitive market.
  FIGURE 12-5
-Refer to Figure 12-5. In the free-market equilibrium, producer surplus is shown by the area
A) P3P2E. 
B) P1P2E. 
C) P1P3E. 
D) 1 +2. 
E) 1 + 2 + 3 + 4.

Quizplus · Accepted Answer

In a free-market equilibrium, producer surplus is shown by the area between the supply curve and the price (P) line up to the quantity provided (Q). In this diagram, that area is P1P2E.

The Diagram Below Shows the Demand and Supply Curves in a Perfectly