Assume the market depicted in the graph is in equilibrium. What is total surplus?

• A. The area below the supply curve up to the equilibrium price
• B. The area between the equilibrium price and the vertical axis
• C. The area between the demand and supply curves up to the equilibrium quantity
• D. The area above the demand curve up to the equilibrium price

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the concept of total surplus in a market. Total surplus is the sum of consumer surplus and producer surplus, representing the total net benefit to society from the production and consumption of a good.
2. Step 2: Identify the equilibrium point on the graph, where the supply curve and demand curve intersect. This point determines the equilibrium price and equilibrium quantity.
3. Step 3: Recognize that consumer surplus is the area between the demand curve and the equilibrium price, up to the equilibrium quantity. It represents the difference between what consumers are willing to pay and what they actually pay.
4. Step 4: Recognize that producer surplus is the area between the supply curve and the equilibrium price, up to the equilibrium quantity. It represents the difference between the price producers receive and their minimum acceptable price.
5. Step 5: Combine these two areas (consumer surplus and producer surplus) to find the total surplus, which is the area between the demand and supply curves up to the equilibrium quantity.