Foundations of Economics, 8th Edition

6.3 Cost, Price, and Producer Surplus

MyEconLab Concept Video

You are now going to learn about cost, price, and producer surplus, which parallels what you’ve learned about value, price, and consumer surplus.

Supply and Marginal Cost

Just as buyers distinguish between value and price, so sellers distinguish between cost and price. Cost is what a seller must give up to produce the good, and price is what a seller receives when the good is sold. The cost of producing one more unit of a good or service is its marginal cost. It is just worth producing one more unit of a good or service if the price for which it can be sold equals marginal cost. The ­supply curve tells us this price. In Figure 6.6(a), the supply curve shows the quantity supplied ...