A supply curve can be used to measure producer surplus because it reflects:

A supply curve can be used to measure producer surplus because it reflects:

A. the actions of sellers.

B. quantity supplied.

C. sellers’ costs.

D. the amount that will be purchased by consumers in the market.

Answer: C. sellers’ costs.

A supply curve is a graphical representation of how the quantity supplied of a good or service changes with changes in the price of the good or service. It is based on the cost structures available to producers and is the actual cost for the production of goods.

The supply curve helps calculate the producer surplus because it includes the costs borne by the sellers, which are vital in explaining their propensity to offer certain quantities for sale. Producer surplus is defined as the amount by which the price received by the producer of a good or service exceeds the price at which the producer would be indifferent to selling an additional unit, commonly referred to as the producer’s cost.

Option A (the actions of sellers) is only half-correct but incomplete, which is because the supply curve only depicts sellers’ cost considerations. Option B (quantity supplied) is an outcome depicted by the supply curve but does not explain how the supply curve can quantify producer surplus. Option D (the amount that will be purchased by consumers) pertains to the demand curve which is irrelevant to the given case.

By including sellers’ costs, the supply curve enables the determination of producer surplus, which shows the economic gain or profit that producers stand to earn from being part of the market at the given price.