The producer surplus is the amount or income that the producer takes for a good, less the variable cost; which is or represents the amount covered by the production of such good. The definition of producer surplus omits the fixed cost, since it is irrelevant for the determination of short-term production.
Businesses cannot avoid paying short-term fixed costs, no matter what they decide to do. Fixed costs are not recurring in the short term, since the company must cover them, whether it produces or not. The cost variable is all that matters for businesses, the marginal cost is the increase in total variable cost increases as the production and the sum of the marginal costs of all units is the total variable cost.
Producer surplus occurs regularly and more easily in the short term than in the long term. Conceptualize the consumer surplus as total income minus the total cost of the variable, this long term for perfectly competitive industries is zero. In long-run equilibrium all costs are variable and total cost equals total income, so there is no producer surplus. It is made up of short-term earnings plus short-term fixed costs. Since long-term equilibrium, profits are zero and there are no fixed costs, all this short-term surplus disappears, entrepreneurs are indifferent to the particular market they are in, because they can obtain the same returns with their investments in any another market. Businesses cannot avoid paying short-term fixed costs, regardless of what they decide to do. Fixed costs are non-recurring in the short term,since the company must cover them, whether it produces or not. Variable cost is the only thing that matters. For each firm, the marginal cost is the increase in total variable cost as production increases, and the sum of the marginal costs of all units is the total variable cost.
Producer surplus is more easily presented or displayed in the short term than in the long term. In long-term equilibrium, all costs are variable and total cost equals total income, so there is no producer surplus. They are made up of short-term profits plus short-term fixed costs. Since the long-term equilibrium, the profits are zero and there are no fixed costs, all this short-term surplus disappears, the owners of the companies are indifferent to the specific market in which they are, because they can obtain the same returns with your investments in any other market.
