ECONOMICS
PROFIT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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the price of the good is higher than the firm’s average total cost
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firm earns an accounting profit
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total revenue is maximised
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total revenue is higher than explicit cost
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Detailed explanation-1: -The firm chooses its quantity so that marginal cost equals price; doing so ensures that the firm is maximizing its profit. In the long run, entry into and exit from the industry drive the price of the good to the minimum point on the average-total-cost curve.
Detailed explanation-2: -Which of the following ensures that a firm is earning an economic profit? The price of the good is higher than the firm’s average total cost.
Detailed explanation-3: -ANSWER: Average revenue is total revenue divided by the amount of output. Marginal revenue is the change in total revenue from the sale of each additional unit of output. Marginal revenue is used to determine the profit maximizing level of production and average revenue is used to help determine the level of profits.
Detailed explanation-4: -If the market price faced by a perfectly competitive firm is above average cost at the profit-maximizing quantity of output, then the firm is making profits. If the market price is below average cost at the profit-maximizing quantity of output, then the firm is making losses.
Detailed explanation-5: -Economics. When a firm’s total revenue is greater than its total economic costs, the firm is earning an economic profit. When TR is greater than TC the firm earns an economic profit and when TC is greater than TR firm earns an economic loss.