ECONOMICS
COMPETITION AND MARKET STRUCTURES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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When revenues are higher than costs
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When revenues equal costs
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When revenues are less than costs
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None of the above
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Detailed explanation-1: -The difference between the revenue and cost (found by subtracting the cost from the revenue) is called the profitThe difference between revenue and cost when revenue exceeds the cost incurred in operating the business..
Detailed explanation-2: -If the company’s revenue is greater than its expenses, it will have a profit. On the other hand, if a company’s expenses are greater than its revenue, it’s operating at a loss.
Detailed explanation-3: -The answer depends on firm’s profit margin (or average profit), which is the relationship between price and average total cost. If the price that a firm charges is higher than its average cost of production for that quantity produced, then the firm’s profit margin is positive and it is earning economic profits.
Detailed explanation-4: -Higher Profit Doesn’t Always Mean Higher Revenue Profit is the amount left over after paying all expenses, while revenue is the total amount made before deducting any expenses. Therefore, a company can have higher profits but lower revenue if its cost base is high relative to their turnover.