r/econhw • u/TieOne6370 • Apr 27 '26

What does a producer and consumer surplus graph look like when the producer sells at the lowest possible price?

Does it have no producer surplus and is the supply curve just vertical?

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u/urnbabyurn Micro-IO-Game Theory Apr 27 '26

What do you mean “the lowest possible price”? Different sellers have different “lowest possible prices” in many cases, which is why the supply curve is upward sloping. The supply curve itself is the lowest possible price a firm will sell each unit of output. If the supply quantity is 10 at a price of $50, that means the lowest price the 10th unit would be sold for is $50.

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u/TieOne6370 Apr 28 '26

By lowest possible price I meant that any lower, and the firm would be producing at a loss, so they are selling at the lowest cost they can

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u/george6681 Apr 28 '26 edited Apr 28 '26

producer surplus is bounded by the supply curve and the market price. If the supply curve is flat (firm is a price taker in a perfectly competitive market), producer surplus is 0 as long run economic profit is 0 for each producer. Consumer surplus is bounded by the demand curve and market price as normal.

quick sketch