Wize AP Microeconomics Textbook > Efficiency

Producer Surplus

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Producer Surplus
Producer surplus is the amount a producer receives for selling a good minus what they are willing to sell it for (or the cost to make it)

Producer Surplus for Individual Sellers
In the diagram below, if the actual selling price is currently $20, the producer surplus for the first seller is $8
 which we find by doing $20
 minus $12
 
For the second seller, the producer surplus is $4

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Total Producer Surplus at Equilibrium

Producer Surplus=(base) ∗ (height) ∗ (12)\boxed{\text{Producer\ Surplus}=(base)\ *\ (height)\ *\ (\frac{1}{2})}Producer Surplus=(base) ∗ (height) ∗ (21​)​

In the diagram above the total producer surplus is 15 * (50-20) * 1/2 = $225

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Example: Producer Surplus
What is the total producer surplus if the current market price of printers is $90

Producer      Willingness to Sell (Marginal Cost)
Jake                                       $75
Jamal                                     $80
Jenna                                     $95

Total producer surplus = $25

Producer surplus for Jake = 90 - 75 = 15
Producer surplus for Jamal = 90 - 80 = 10
Producer surplus for Jenna = 0 (because she is not willing to sell the product for 90$)

Total producer surplus = 15 + 10 = $25