Producer surplus equals the excess of price over marginal cost, summed over the quantity produced.

In a competitive equilibrium, marginal benefit equals marginal cost and resource allocation is efficient.

Price and quantity regulations, taxes, subsidies, externalities, public goods, common resources, monopoly, and high transactions costs lead to market failure and create deadweight loss.

Ideas about fairness divide into two groups: fair rules and a fair result.

Fair rules require private property rights and voluntary exchange, and a fair result requires income transfers from the rich to the poor.

Distinguish between cost and price, and define producer surplus.

6.3