Producer surplus

Question

Producer surplus

BlackTom AI · Accepted Answer

To analyze producer surplus, we need to focus on the relationship between what producers are willing to accept and the price they actually receive. 
Option 1 says: 'is the difference between the minimum price producers are willing to accept for a product and the higher equilibrium price.' This aligns with the core idea that producer surplus = price received minus the minimum acceptable price (the marginal cost). The wording may list the two endpoints in opposite order, but the difference between the price producers receive (the higher equilibrium price) and their minimum acceptable price captures the same positive surplus when the market price exceeds the minimum acceptable price. 
Option 2 says: 'rises as equilibrium price falls.' This is inconsistent with the producer surplus concept: if the equilibrium price falls while costs stay the same, the surplus typically decreases, not rises, so this statement is incorrect. 
Option 3 says: 'is the difference between the maximum price consumers are willing to pay for a product and the lower equilibrium price.' That description corresponds more closely to consumer surplus components in some contexts, but it misstates the producer side by using consumer valuation rather than the actual price received by producers, so it is not the correct definition of producer surplus. 
Option 4 says: 'is the difference between the maximum price consumers are willing to pay for a product and the minimum price producers are willing to accept.' This would combine both willingness to pay and minimum acceptable price, which does not equal producer surplus (it resembles a measure that combines aspects of both sides of the market rather than the producer’s actual gain above cost). The producer surplus is not calculated using the consumer’s maximum willingness to pay. 
Taken together, the analysis of each option shows that the statement in Option 1 most closely matches the standard definition of producer surplus, while the others mix up the roles of price, willingness to pay, and cost.

Producer surplus

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