Differentiate between the terms "revenue" and "profit." Assume that a firm sells 20 units of a good at a price of $5 per unit. If the average total cost of the firm is $3 per unit, calculate the firm's profit
What will be an ideal response?
The revenue of a firm is equal to the price of the goods multiplied by the quantity of goods sold. On the other hand, the profit of a firm is equal to the difference of the revenue that a firm earns and the costs it incurs.
If a firm sells 20 units of a good at $5 each, its revenue is equal to 20 × $5 or $100.
If the average total cost of the firm is $3, the total cost it incurs is 20 × $3 or $60.
Hence, profits of the firm are $100 - $60 or $40.
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If the government removes a binding price floor from a market, then the price paid by buyers will
A. decrease, and the quantity sold in the market will increase. B. decrease, and the quantity sold in the market will decrease. C. increase, and the quantity sold in the market will decrease. D. increase, and the quantity sold in the market will increase.
Refer to the above figure. Profits for this firm are positive
A) only for all points less than B. B) only at points B and C. C) for points between B and C. D) for all points less than B and greater than C.