(Figure: Determining Surplus and Loss) In the graph, producer surplus is _____ in equilibrium and _____ at a price of $12.

Question

Quizplus · Accepted Answer

In equilibrium, producer surplus is equal to the area above the supply curve and below the market price. In this case, at an equilibrium price of $8, the producer surplus is $120. 
At a price of $12, producers would only be willing to supply a quantity of 2, while consumers would only demand a quantity of 6. This would result in a surplus of 4, causing the price to decrease back to the equilibrium price of $8. At a price of $12, producer surplus would only be equal to the area of the triangle above the supply curve and between a quantity of 0 and 2, which would be $170. Therefore, the best choice is C, with a producer surplus of $120 at equilibrium and $170 at a price of $12.

(Figure: Determining Surplus and Loss) in the Graph, Producer Surplus