Subsidy's effect on producer surplus in supply-demand diagram

Steps:

• Locate original equilibrium at intersection of supply (S) and demand (D) curves, say at price P and quantity Q.
• Subsidy shifts supply downward to S', creating new equilibrium at lower consumer price (P - subsidy) and higher quantity Q'.
• Identify areas: subsidy increases producer surplus by the area between original and new supply curves up to Q'.
• Select area RSU as the gain in producer surplus due to higher price received by producers net of subsidy.

Why C is correct:

• RSU represents the increase in producer surplus, per economic definition, as the trapezoid between S and S' from original Q to new Q', reflecting extra revenue from expanded output.

Why the others are wrong:

• A. OPVU: This is original consumer surplus triangle, unchanged by subsidy.
• B. PTQU: This shows new consumer surplus gain, not producer-focused.
• D. ORST: This covers total original equilibrium area, irrelevant to subsidy impact.

Final answer: C