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What is producer surplus and how is it measured? What is the relationship between the cost...

What is producer surplus and how is it measured? What is the relationship between the cost to sellers and the supply curve? All else being equal, what happens to producer surplus when the price of a good rises?

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Answer #1

Producer surplus is the total benefit to producers of producing and selling a good or service in the market at the market price. It is measured as the difference between market price and cost to sellers. Grpahically, it is the area below the market price and above the supply curve.
Supply curve shows the cost to seller corresponding to each quantity produced.
Producer surplus increases as market price rises because it is the difference between market price and cost.

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