Producer Surplus as Revenue Minus Costs

Steps:

• Identify equilibrium at intersection of demand (downward) and supply (upward) curves.
• Total revenue is rectangle OWYZ (equilibrium price times quantity).
• Area under supply curve to equilibrium quantity is triangle OWY (minimum costs).
• Subtract OWY from OWYZ to get producer surplus (gains above costs).

Why B is correct:

• B (OWYZ minus OWY) matches definition: producer surplus equals total revenue minus integral of supply curve (variable costs) up to equilibrium output.

Why the others are wrong:

• A: OWYZ minus OYZ subtracts consumer surplus area, yielding deadweight loss.
• C: OXY minus OWY uses demand curve area, representing consumer surplus instead.
• D: OXZ minus WXY involves extraneous points, not aligning with revenue-cost difference.

Final answer: B