The difference between the market price and the minimum price at which a seller is willing to sell a certain quantity of a good is:
A) producer shortage.
B) consumer shortage.
C) producer surplus.
D) consumer surplus.

Question

Quizplus · Accepted Answer

The minimum price at which a seller is willing to sell a certain quantity of a good is known as the seller's reservation price. If the market price is higher than the seller's reservation price, then the seller earns a surplus known as producer surplus, which is the difference between the market price and the reservation price. Therefore, the correct answer is C) producer surplus. A) and B) are incorrect because they refer to shortage, which would occur if the market price was below the seller's reservation price or above the buyer's reservation price, respectively. D) is incorrect because it refers to the difference between the maximum price a buyer is willing to pay and the market price, which is consumer surplus.

The Difference Between the Market Price and the Minimum Price