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Is a surplus a good idea?

A surplus isn't necessarily desirable. For example, a manufacturer who over-projects future demand for a given product may create too many unsold units, which may consequently contribute to quarterly or annual financial losses.

What is a surplus in accounting?

A surplus is an excess of revenue over expenditure during a particular accounting period. A charity's surplus at the end of a financial year is not liable to taxation. Not-for-profit institutions treat a surplus of operating revenues over operating costs as a profit that they are not supposed to make.

What is a producer surplus?

In the same auction context, if an auction house sets the opening bid at the lowest price it would comfortably sell a painting, a producer surplus occurs if buyers create a bidding war, thus causing the item to sell for a higher price, far above the opening minimum.

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