Multiple Choice
If a firm produces 5 units and sells each for \$39.00, what is the firm's total revenue?
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10. The Costs of Production
Revenue, Cost, and Profit
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If both a firm's revenue and cost remain constant over time, what will happen to its profit?
A
Profit will remain constant.
B
Profit will decrease.
C
Profit will increase.
D
Profit will fluctuate unpredictably.
Verified step by step guidance1
Recall the definition of profit in microeconomics: Profit is the difference between total revenue and total cost, expressed as \(\text{Profit} = \text{Total Revenue} - \text{Total Cost}\).
Since the problem states that both the firm's revenue and cost remain constant over time, this means \(\text{Total Revenue}\) is constant and \(\text{Total Cost}\) is constant.
Substitute these constant values into the profit formula: \(\text{Profit} = \text{Constant Revenue} - \text{Constant Cost}\).
Because both components are constant, their difference (profit) will also be constant over time.
Therefore, the firm's profit will remain constant as long as revenue and cost do not change.
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