We can measure producer and consumer surplus by looking at a graph of supply and demand. Producer surplus is:
A) the area above the supply curve but below the equilibrium price.
B) the area below the demand curve but greater than the equilibrium price.
C) the area below the demand curve all the way down to the quantity axis.
D) the combined triangular area below the demand curve and above the supply curve.

Question

Quizplus · Accepted Answer

Producer surplus is the area above the supply curve but below the equilibrium price, representing the extra profit earned by producers due to the market price being higher than their willingness to sell. Option B describes consumer surplus, option C describes the total revenue earned by producers, and option D describes the deadweight loss from a market inefficiency.

We Can Measure Producer and Consumer Surplus by Looking at a Graph