Producer Surplus as Revenue Minus Costs

Steps:

• Locate equilibrium point Y, where demand and supply intersect, setting price at level W and quantity at X.
• Total revenue is rectangle OWYX (area OWY, assuming Y as height).
• Total variable cost is area under supply curve OYZ.
• Subtract variable cost from revenue to get producer surplus: OWY minus OYZ.

Why B is correct:

• Producer surplus is total revenue minus total variable costs, per economic definition, equaling area above supply curve up to price line.

Why the others are wrong:

• A: OYZ minus OYZ equals zero, not surplus.
• C: OYZ minus OWY yields negative value, impossible for surplus.
• D: OXY minus WXY misidentifies revenue and cost areas, ignoring supply curve base.

Final answer: B