Question

Explain that metaphor:

A Surplus is like Profit.

Explain this metaphor:

Producer Surplus like Profit.

Answer 1

A Surplus is like Profit.

To describe many excess assets, including revenue, revenues, capital, and products, a surplus is used. Often, a surplus happens in a budget when costs are lower than the income received in or in inventory when less supplies are used than those retained. Offer and demand are related to economic surplus.

Net profit is the gross profit (revenue minus cost of goods) minus operating expenses and all other expenses, such as taxes and interest paid on debt. Although it may appear more complicated, net profit is calculated for us and shows up on the income statement as net income.

Producer Surplus like Profit.

Economic profit is the difference between total revenue and total cost. Producer surplus is the difference between total revenue and total variable cost or total revenue and marginal cost. Thus, the difference between profit and PS is the fixed cost of production.

If costs are sunk, the company may obtain a rent that is not sufficient to cover the cost of the sunk. In such a case, the price exceeds the lowest amount the firm is willing to accept for its product, but negative profits are generated by the firm (positive producer surplus). They coincide, however, in particular.