Spatially resolved optical diagnostics are applied to a free-burning DC arc in argon at atmospheric pressure. Densities of metastable and resonance 1s-atoms are measured by laser atomic absorption spectroscopy (LAAS). The novel LAAS design allowed for an extended range of wavelength scan covering the complete Stark broadened line profile (∼0.5 nm). High spatial resolution of 0.2 mm allowed measurements of atom densities and line profiles in the regions of high-temperature gradients. Besides absorbing 1s-states, the radiating 2p-states were measured using optical emission spectroscopy (OES). Results of the LAAS and OES measurements are compared with the nonequilibrium collisional-radiative model. Measurement of metastable states in the non-radiating regions near the cathode reveals the existence of a collar effect. The interpretation of the effect with a focus on transport of resonance radiation is given, quantitative agreement between simulations and experiment is reached.