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Figure 3.2 Defining Producer Surplus
Producer surplus is the difference between the price producers actually receive for their goods and the price at which they are willing to sell them. The market supply curve shows how many pounds of apples sellers are willing to supply at a given price. Firm V is willing to sell apples at a price of $2 per pound; at a market price of $3.50, the firm receives a $1.50 producer surplus. Similarly, at the market price of $3.50, firms W, X, and Y receive producer surpluses of $1, $0.50, and $0, respectively. Firm Z does not sell any apples. The total producer surplus is the area above the supply curve and below the price, represented by the area of the shaded triangle PS, with the base of the triangle the total quantity sold and the height the difference between the market price and the supply choke price.