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Is Producer Surplus a Surplus to the Producer?

Author

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  • Wenli Cheng

    (Department of Economics, Monash University)

Abstract

This paper clarifies the concept of producer surplus in the short-run and the long-run contexts. It shows that in the short run, producer surplus is the sum of economic profit (or loss) to the firm and quasi-rent which goes to owners of fixed factors. In the long run, producer surplus is rent, which goes to owners of specialised factors of production. In either case, producer surplus is not necessarily a surplus to the producer which is commonly understood to be the firm.

Suggested Citation

  • Wenli Cheng, 2023. "Is Producer Surplus a Surplus to the Producer?," Monash Economics Working Papers 2023-19, Monash University, Department of Economics.
    • Handle: RePEc:mos:moswps:2023-19
    as

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    References listed on IDEAS

    as
    1. Johnson, Ronald N & Libecap, Gary D, 1982. "Contracting Problems and Regulation: The Case of the Fishery," American Economic Review, American Economic Association, vol. 72(5), pages 1005-1022, December.
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    More about this item

    Keywords

    Producer surplus; profit; rent;
    All these keywords.

    JEL classification:

    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General

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