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Which of the following best describes the concept of economic surplus in the context of a business owner generating a consistent income and maintaining a healthy business?
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5. Consumer and Producer Surplus; Price Ceilings and Price Floors
Economic Surplus and Efficiency
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If the economic cost is 96,000 and total revenue is 120,000, what is the economic profit?
A
96,000
B
120,000
C
216,000
D
24,000
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Recall the formula for economic profit: Economic Profit = Total Revenue - Economic Cost.
Identify the given values: Total Revenue (TR) = 120,000 and Economic Cost (EC) = 96,000.
Substitute the given values into the formula: Economic Profit = 120,000 - 96,000.
Perform the subtraction to find the economic profit (do not calculate the final number here, just set up the expression).
Interpret the result: a positive economic profit means the firm is earning more than its total economic costs.
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