3.3.3 Profit

• What is the definition of profit?

  Total Revenue - Total Costs
• Economic profit takes into account both explicit costs and opportunity
• Accounting profit includes opportunity costs in its calculation.

  False
• Economic profit is calculated as total revenue minus explicit costs and opportunity
• Match the type of profit with its calculation:

  Gross Profit ↔️ Total Revenue - COGS

  Operating Profit ↔️ Gross Profit - Operating Expenses

  Net Profit ↔️ Operating Profit - Interest and Taxes
• Arrange the types of profit in order of calculation, from first to last:

  1️⃣ Gross Profit

  2️⃣ Operating Profit

  3️⃣ Net Profit
• Net profit is the final profit figure after all expenses and taxes have been subtracted.
• Operating profit is calculated by subtracting operating expenses from gross
• What is the formula for profit?

  $\text{Profit} =$$\text{Total Revenue} - \text{Total Costs}$
• The difference between accounting and economic profit lies in the consideration of opportunity costs.
• Accounting profit is calculated by subtracting explicit costs from total revenue.
• How is economic profit calculated?

  Total Revenue - (Explicit Costs + Opportunity Costs)
• Order the steps in calculating accounting and economic profit.

  1️⃣ Calculate Total Revenue

  2️⃣ Calculate Explicit Costs

  3️⃣ Subtract Explicit Costs from Total Revenue to get Accounting Profit

  4️⃣ Calculate Opportunity Costs

  5️⃣ Subtract Opportunity Costs from Accounting Profit to get Economic Profit
• What is the mathematical representation of profit?

  $\text{Profit} =$$\text{Total Revenue} - \text{Total Costs}$
• There are two types of profit: accounting and economic.
• Economic profit takes into account both explicit and opportunity costs.
• Gross profit is calculated by subtracting COGS from total revenue.
• How is operating profit calculated?

  Gross Profit - Operating Expenses
• Net profit is the final profit after deducting all expenses, including interest and taxes.
• Match the type of profit with its calculation:

  Gross Profit ↔️ Total Revenue - COGS

  Operating Profit ↔️ Gross Profit - Operating Expenses

  Net Profit ↔️ Operating Profit - Interest and Taxes
• What does total revenue represent in profit calculations?

  Total income from sales
• Profit allows businesses to reinvest, expand, and weather financial downturns.
• Profit is an incentive for entrepreneurs to innovate.
• Profit is mathematically defined as the difference between total revenue and total costs.
• What is the first condition for profit maximization in economics?

  $MR =$$MC$
• The marginal cost curve must be rising at the point where marginal revenue equals marginal cost for profit maximization.
• In perfect competition, marginal revenue equals marginal cost, which equals price
• Profit is the difference between total revenue and total costs
• The formula for profit is Total Revenue minus Total Costs.
• Gross profit is calculated by subtracting the cost of goods sold from total revenue
• Gross Profit equals Total Revenue minus COGS.
• What is subtracted from gross profit to calculate operating profit?

  Operating expenses
• Net profit is the final profit after deducting all expenses, including interest and taxes
• Which type of profit covers only the direct costs of production?

  Gross Profit
• Net Profit includes all expenses and taxes.
• Gross profit represents the direct profitability of the products sold
• What is subtracted from gross profit to calculate operating profit?

  Operating expenses
• Operating expenses include salaries, rent, and marketing costs.
• What is deducted from operating profit to calculate net profit?

  Interest and taxes
• Gross profit covers the direct costs of production