Asked by America Becerra on May 19, 2024
Verified
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.
Producer Surplus
The disparity between the amount sellers are ready to accept for a good or service and the price they actually receive.
Supply-and-Demand
A fundamental economic model that describes how the price and quantity of goods and services are determined in a market based on the amount available (supply) and the desire to purchase (demand).
Equilibrium Output
The level of output where the quantity of goods or services producers are willing to supply equals the quantity consumers are willing to buy, resulting in market equilibrium.
- Understand the principle of producer surplus and its connection to both firm-level and market-wide economics.
Verified Answer
CP
Christelle PagonisMay 23, 2024
Final Answer :
E
Explanation :
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.
Learning Objectives
- Understand the principle of producer surplus and its connection to both firm-level and market-wide economics.