Question

When Total Revenue equals Economic Costs, it means that the firm________________.

• A. Has No-profits-No-Loss
• B. Earns Normal Profits
• C. Earns more than Normal Profits (i.e. Super -Normal Profits)
• D. Incurs Looses in the accounting sense

Answer 1

Answer: (B)

Earns Normal Profits

Accounting profit is the monetary costs a firm pays out and the income a firm receive. It is the accounting profit, and it is higher than economic profit.

Accounting profit = total monetary revenue- total costs.

Economic profit is the monetary costs and opportunity costs a firm pays and the revenue a firm receives.The level of profit that occurs when total revenue is equal to total cost. This stage indicates that a firm is doing just as well as it would have if it had selected to use its income to produce a different product or struggle in a different industry.

Common profit is also known as zero monetary profit.

Thus, the correct option is B.