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Producer surplus is the difference between the amount that a producer actually receives and the amount at which a producer is willing to sell their product.

In a perfectly competitive market, the firm is a price taker, and the market price is given. So, the amount that a producer actually receives is determined by the market price of the product.

The firm's willingness to supply is given by its supply curve. In the short run, the supply curve is represented by the marginal cost of the firm.

Consider a hypothetical scenario where a firm operates in perfect competition, producing and selling coffee machines.

The market price is $150 per unit. For ease of analysis, the marginal cost of the first machine is assumed to be $110, the second at $120, the third at $130, the fourth at $140, and the fifth at $150.

The firm will be willing to supply the machines until the marginal cost equals the market price at $150.

Producer surplus will be the sum of the differences between the market price of $150 and the marginal cost of producing each machine, up to the quantity where the market price equals the marginal cost.