Which of the Following Statements Is Correct Regarding Normal Profits

question 79

Multiple Choice

Which of the following statements is correct regarding normal profits?

• A)They are calculated by subtracting explicit costs from total revenue.
• B)Earning normal profits is considered a necessary part of doing business.
• C)They would always be smaller than economic profits.
• D)They are what is left over after economic profits are covered.

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Definitions:

Liabilities

Financial obligations or debts owed by a business or individual to another entity, payable in money, goods, or services.

Equity

The value of an owner's interest in a property or business, determined by subtracting liabilities from assets.

Assets

Economic resources owned or controlled by a business, expected to produce future benefits.

Net Income

The total profit of a company after all expenses, including taxes and interest, have been deducted from total revenue.