In a perfectly competitive market, a firm produces and sells a certain amount of goods. Among the following what reflect the firm's profit?
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Total Revenue - Total Cost.
In any market — including perfect competition — a firm’s profit is the difference between what it earns (Total Revenue) and what it spends (Total Cost) on producing goods.
Mathematically, Profit=Total Revenue (TR)−Total Cost
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Total Revenue (TR) = Price × Quantity Sold
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Total Cost (TC) = Fixed Cost + Variable Cost