The supply function is p = S(x), and the market clears at quantity x₀ and price p₀. Which expression gives the producer surplus?

Question 60

MediumOriginal question

The supply function is $p = S(x)$ , and the market clears at quantity $x_0$ and price $p_0$ . Which expression gives the producer surplus?

\int_{0}^{x_0} S(x)\,dx - p_0x_0

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\int_{0}^{x_0} S(x)\,dx

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p_0x_0

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p_0x_0 - \int_{0}^{x_0} S(x)\,dx

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CorrectNot quiteAnswer D

Correct answer: D

Producers receive $p_0x_0$ , the rectangle under the price line.
The least they would accept is the area under the supply curve; the surplus is the difference.

Worth noting

The reversed difference is negative: the supply curve lies below the price line up to $x_0$ .

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