Producer surplus definitely exists when the
A) price exceeds marginal benefit.
B) price exceeds marginal cost.
C) marginal cost exceeds the price.
D) marginal benefit exceeds the price.
E) marginal benefit exceeds the marginal cost.

Question

Quizplus · Accepted Answer

Producer surplus is the difference between the price received by producers and the marginal cost of production. Therefore, it exists when the price exceeds marginal cost (option B). If marginal benefit exceeds the price (option D), this creates consumer surplus, not producer surplus. If marginal benefit exceeds marginal cost (option E), this indicates that the firm is generating economic profit, which includes both producer surplus and other forms of profit.

Producer Surplus Definitely Exists When the