3.2.3 Profits

Cards (26)

  • What does Total Revenue (TR) represent for a business?
    Income from sales
  • Profit maximization occurs when marginal revenue equals marginal cost.

    True
  • Order the steps to calculate Total Costs (TC):
    1️⃣ Calculate Fixed Costs (FC)
    2️⃣ Calculate Variable Costs (VC)
    3️⃣ Add FC and VC to find TC
  • Variable Costs (VC) change directly with the level of output.
  • What is the condition for profit maximization in terms of marginal revenue and marginal cost?
    MR = MC
  • Total Revenue is calculated by multiplying the price per unit by the quantity sold.
  • What is normal profit in business terms?
    Profit covering all costs
  • Profit maximization occurs when marginal revenue equals marginal cost.

    True
  • Abnormal profit represents earnings above the break-even point
  • Marginal revenue equals marginal cost at the level of output where profit maximization occurs.

    True
  • Abnormal profit indicates that total revenue exceeds total costs
  • Match the profit type with its formula:
    Normal Profit ↔️ TR = TC
    Abnormal Profit ↔️ TR > TC
  • What is the formula for total costs?
    FC + VC
  • The formula for calculating Total Profit (TP) is TR - TC.
  • Match the components of Total Revenue with their definitions:
    Price per unit (P) ↔️ Price at which each product is sold
    Quantity sold (Q) ↔️ Total number of products sold
  • What are Fixed Costs (FC)?
    Costs that do not vary with output
  • Total Profit is calculated by subtracting Total Costs from Total Revenue.

    True
  • Match the types of profit with their definitions:
    Normal Profit ↔️ Covers all costs, including entrepreneur's salary
    Abnormal Profit ↔️ Profit exceeding normal profit
  • Total Costs include both Fixed Costs and Variable Costs.
    True
  • Abnormal profit occurs when total revenue exceeds total costs
  • What condition is necessary for a firm to earn normal profit?
    Total revenue equals total cost
  • What formula is used to calculate average profit (AP)?
    AP = TP / Q
  • At what point does total revenue equal total cost in business?
    Normal profit
  • How is total profit (TP) calculated?
    TR - TC
  • Fixed costs do not change with the level of output
  • Match the profit type with its condition:
    Normal Profit ↔️ TR = TC
    Abnormal Profit ↔️ TR > TC