Refer to Figure 7-6. When the price is p2, producer surplus is:

• A. equal to zero
• B. the area between the demand curve and the price p2, up to the quantity sold
• C. the area above the price p2 and below the demand curve
• D. the area between the supply curve and the price p2, up to the quantity sold

Answer: (D)

Verified step by step guidance

1. Understand the definition of producer surplus: it is the difference between what producers are willing to accept (represented by the supply curve) and the actual price they receive, summed over the quantity sold.
2. Identify the price level given in the problem, which is \(p_2\), and the corresponding quantity sold at this price on the supply curve.
3. Locate the supply curve on the graph and note the area between this curve and the horizontal line at price \(p_2\), from zero quantity up to the quantity sold.
4. Recognize that this area represents the producer surplus because it measures the extra benefit producers receive by selling at price \(p_2\) instead of their minimum acceptable price (the supply curve).
5. Confirm that the producer surplus is not related to the demand curve or the area above the price line, but specifically the area between the supply curve and the price \(p_2\) up to the quantity sold.