ECONOMICS
PROFIT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Yes, I understand this from the notes
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No, I don’t understand this from the notes
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No, I don’t understand this, as I have not read the notes
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None of the above
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Detailed explanation-1: -Often called abnormal profit, is when a firms total sales revenue exceed the total costs of production i.e. they are earning a profit above and beyond the level of normal profit. This is the level of profit that a firm can enjoy after meeting the main production costs.
Detailed explanation-2: -Supernormal profit occurs when the organisation’s total revenue exceeds its total cost. The total cost includes all variable and fixed costs and the minimum income acceptable for the business.
Detailed explanation-3: -Profit is defined as the difference of total revenue (TR) over total cost (TC) of the firm. So profit = TR – TC. Economists often distinguish between super normal profit and normal profit. Super normal profit is defined as the surplus of total, revenue over total cost.
Detailed explanation-4: -In economics, profit maximization occurs when there is a maximum gap between total revenue (TR) and the total cost (TC). In other words, it happens when the marginal revenue of production is equal to or more than its marginal cost. (MR = MC).