What is the definition of "producer surplus" in economics?

Producer surplus is defined as the difference between the lowest price that producers are willing to accept for a good or service (which reflects their costs) and the actual price they receive in the market. This concept illustrates the benefit that producers receive when they are able to sell their product at a higher price than the minimum amount they would have accepted to produce it.

When the market price exceeds this minimum acceptable price, producers gain a surplus, which acts as an incentive for them to produce more goods, as it signals profitability. This surplus is an important component of economic analysis because it reflects the producers' welfare and the overall efficiency of market transactions.

The other options do not accurately describe producer surplus: the amount consumers are willing to pay refers to consumer surplus, total revenue simply accounts for income without indicating profits above costs, and the costs associated with producing goods do not factor in the actual selling price, which is essential for calculating surplus.