Identifying Economic Surpluses in Market Diagrams

Steps:

• Locate equilibrium where supply and demand intersect, determining price (e.g., OZ) and quantity (e.g., OX).
• Consumer surplus is the triangular area below demand curve and above equilibrium price, up to quantity supplied.
• Producer surplus is the triangular area above supply curve and below equilibrium price, up to quantity demanded.
• Match labeled areas (PYZ, XYZ) to these surplus definitions based on curve positions.

Why D is correct:

• Producer surplus equals the area between equilibrium price and supply curve to equilibrium quantity, defined as the difference between what producers receive and minimum willingness to sell, forming triangle XYZ.

Why the others are wrong:

• A: OX is equilibrium quantity, not a shutdown price threshold for producers.
• B: OZ is equilibrium price; minimum consumer willingness varies along the demand curve.
• C: PYZ is consumer surplus area, not producer.

Final answer: D