For an individual firm operating in the long run, producer surplus equals:
A)the difference between total revenues and total opportunity costs.
B)the difference between total revenues and total sunk costs.
C)economic rent.
D)The difference between market demand and market supply.

Question

Quizplus · Accepted Answer

In the long run, all costs are variable and opportunity costs must be considered. Producer surplus is the difference between total revenues and total opportunity costs, which represents the amount of revenue that is earned above and beyond the amount necessary for the firm to continue operating in the long run. Producer surplus is the difference between total revenues and total opportunity costs. In the long run, all costs are variable, and thus all costs must be taken into account when calculating producer surplus. Sunk costs are not included in calculating producer surplus as they are past costs that cannot be recovered. Economic rent refers to the return to a factor of production that is in fixed supply, such as land, and is not relevant to calculating producer surplus. Market demand and supply are relevant to determining market equilibrium price and quantity, but not producer surplus.

For an Individual Firm Operating in the Long Run, Producer