Economic Profits Are Earned When

question 23

Multiple Choice

Economic profits are earned when

• A)price equals marginal cost.
• B)price equals average variable costs.
• C)price equals average total costs.
• D)price is greater than average total costs.

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Definitions:

Demand Function

A mathematical equation that describes the relationship between the quantity demanded of a good and its price, along with other factors like income and price of related goods.

Fixed Cost

Costs that do not vary with the volume of production or sales, such as rent, salaries, and insurance.

Expense Equation

A formula used to calculate the total expenses by adding various costs and expenses associated with operating a business or managing personal finances.

Markup

The amount added to the cost price of goods to cover overhead and profit.