Final answer:
In a competitive equilibrium for the wheat market, the total surplus equals the sum of consumer surplus (area 1) and producer surplus (area 2 + 3). However, government intervention such as price floors can lead to a surplus (Qd) and deadweight loss, changing the distribution and total surplus.
Step-by-step explanation:
If the wheat market is in competitive equilibrium, the total surplus will equal the sum of consumer surplus and producer surplus. In typical supply and demand graphs, these surpluses are represented as triangles or trapezoids under the demand curve (consumer surplus) and above the supply curve (producer surplus), bounded by the market price.
However, with government intervention, such as a price floor that keeps prices artificially high to benefit producers, the result is often a market surplus, where the quantity supplied exceeds the quantity demanded.
Based on a typical supply and demand diagram with areas labeled, the total surplus in competitive equilibrium without government intervention would typically be represented by the areas 1 + 2 + 3, which include consumer surplus (area 1) plus producer surplus (area 2) plus any additional areas captured by tax or other interventions, if present.
However, the presence of area 4 (typically deadweight loss due to overproduction) and area 5 (lost consumer surplus due to higher prices) is indicative of a market with a surplus resulting from a price above equilibrium set by a policy aiming to keep prices high for farmers, such as the price pf in Europe's market for wheat.
Therefore the correct Option is b.area 1 + 2 + 3.