Producer Surplus in Market Equilibrium

Steps:

• Identify equilibrium: Price P and quantity Q where supply and demand intersect.
• Locate supply curve: Starts at origin O, rises to point V on price axis or along curve to W at Q.
• Define producer surplus: Area below equilibrium price P and above supply curve, from 0 to Q.
• Calculate area: Total revenue rectangle OPWQ minus variable cost area under supply OUVW.

Why A is correct:

• Producer surplus equals total revenue (OPWQ) minus total variable costs (OUVW), per economic definition.

Why the others are wrong:

• B duplicates A, but question specifies A as correct identifier.
• C subtracts revenue from a larger area, yielding negative surplus, which is impossible.
• D mirrors C's error, inverting the subtraction for incorrect negative value.

Final answer: A