Mathematics of producer surplus wrong?

  • Thread starter Nikitin
  • Start date
  • Tags
    Mathematics
In summary, producer surplus is a measure of the benefit that producers receive from participating in a market. It is calculated by finding the area above the equilibrium price and below the supply curve, and it helps to measure the efficiency of a market. However, it is possible for producer surplus to be negative and the calculation can be incorrect if not done accurately.
  • #1
Nikitin
735
27
The formula for producer surplus is:

Income - expenses = P*Q - ∫M(Q)dQ

However, shouldn't it be P*Q - (∫M(Q)dQ + FC), with FC= fixed costs?

I mean, the marginal costs are just the derivative of total costs, and thus integrating them is the same as just integrating the variable costs, ignoring the fixed costs of production.
 
Last edited:
Physics news on Phys.org
  • #2
And concerning demand-curves:

Do they represent the quantity the market is willing to buy?
 

FAQ: Mathematics of producer surplus wrong?

What is producer surplus in mathematics?

Producer surplus is a measure of the difference between the price at which a producer is willing to sell a good or service and the actual price they receive. It is a way to quantify the benefit that producers receive from participating in a market.

How is producer surplus calculated?

To calculate producer surplus, you need to know the supply curve for a good or service. The area above the equilibrium price and below the supply curve represents the producer surplus. This can be calculated by finding the area of a triangle, rectangle, or other geometric shape using basic mathematical formulas.

What is the importance of producer surplus in economics?

Producer surplus is an important concept in economics because it helps to measure the efficiency of a market. When there is a large producer surplus, it indicates that producers are benefitting from the market and have an incentive to continue producing. This can lead to a more competitive market and lower prices for consumers.

Can producer surplus be negative?

Yes, it is possible for producer surplus to be negative. This occurs when the price at which a producer is willing to sell a good or service is higher than the actual price they receive. This can happen in situations where there is excess supply or when the market is not working efficiently.

How can the calculation of producer surplus be wrong?

There are a few ways in which the calculation of producer surplus can be incorrect. Some possible reasons include using the wrong supply curve, not accounting for external factors that may affect the market, or using inaccurate data. It is important to carefully consider all factors and use accurate information when calculating producer surplus.

Similar threads

Exploring the Possibility of 100% Renewable Grid w/ Super Power
Replies
8
Views
1K
Suggest me some economic concepts to learn
Replies
31
Views
9K
What is the Appropriate Cost Function for a Start Up Business?
Replies
3
Views
2K
MHB Finding maximum output, profit and consumer surplus
Replies
1
Views
3K
A Quadrupole radiation formula for gravity
Replies
3
Views
348
Analysis Understanding how they thought of math proofs in the first place
Replies
10
Views
3K
Optimizing Level of Output for Profit-Maximizing Firm
Replies
1
Views
3K
I Conservation of Mass for Compressible Flow
Replies
33
Views
3K
Force of pressurized water exiting a hose or pipe?
Replies
20
Views
8K
Time dependant Potential Energy in ion trap
Replies
1
Views
1K

Hot Threads

Recent Insights

Back
Top