Answer :
b. Profit is defined as total revenue minus total cost.
- The correct answer is b. Total revenue minus total cost. Profit, in economic terms, is the difference between the total revenue a business generates and the total costs it incurs. This is crucial for any business as it measures the efficiency and profitability of operations. For example, if a company generates $100,000 in total revenue and has total costs of $70,000, the profit would be $30,000.
- Economic profit specifically includes both explicit costs (like wages and rent) and implicit costs (like opportunity cost). While accounting profit focuses on explicit costs, economic profit gives a complete picture by including opportunity costs.
Complete question
Profit is defined as:
a. Net revenue minus depreciation,
b. Total revenue minus total cost,
c. Average revenue minus average total cost,
d. Marginal revenue minus marginal cost.
Profit is defined as total revenue minus total cost.
[tex]Profit = (Total revenue) - (Total cost)[/tex]
Total revenue is the income generated by a company from the sale of its products.
It is calculated by multiplying the product's price by the amount of output sold:
[tex]Revenue = Price * Quantity[/tex]
Costs are classified into two types: explicit and implicit.
Explicit costs are payments made from one's own resources.
Wages paid to employees and office rent are two examples of explicit costs.
Implicit costs are less obvious but no less significant.
They represent the opportunity cost of simply using resources that the company already owns.
They are frequently attributed resources by small business owners.
Implicit costs also allow for the depreciation of products, materials, and equipment needed to run a business.
Hence, option 'b' is the correct answer.
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