3.2.3 Profits

• 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