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  • Maximizing the Gains from Trade

  • Calculating Total Producer Surplus Using Integration

  • Visualization of Consumer and Producer Surplus at a Non-Equilibrium Point (Figure E8.5)

Condition for Maximizing Producer Surplus: Price Equals Marginal Cost

Regardless of the market price, a producer's surplus is maximized when they choose a quantity of output where the marginal cost of production is equal to the market price. This condition, P = MC, can be derived using calculus and it identifies the specific quantity that maximizes the producer's total surplus. [2, 6] This is equivalent to finding the quantity on the supply curve that corresponds to the given market price. [2, 6]

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Introduction to Microeconomics Course

The Economy 2.0 Microeconomics @ CORE Econ

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Learn After

  • A company manufactures widgets in a competitive market, selling each for a stable price of 50.Thefirmiscurrentlyproducing2,000widgetspermonth.Atthisspecificproductionlevel,itsmarginalcostis50. The firm is currently producing 2,000 widgets per month. At this specific production level, its marginal cost is 42. To maximize its surplus, what should the company do?

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