The difference between firm's total revenue and total cost is called?

The correct answer is Option (4) → Profit

A firm sells its output and receives total revenue; to produce that output it pays for labour, land, capital and materials, its total cost. What is left of the revenue after the costs are paid is the firm’s profit, written π:

• π = TR − TC

A firm chooses its output so as to make this gap as large as possible.

Why the other options are incorrect

• Option (1) Output — Incorrect. Output is the quantity of the good the firm produces, a physical quantity and not a difference between revenue and cost.

• Option (2) Production — Incorrect. Production is the process of turning inputs into output; it describes an activity, not a money surplus.

• Option (3) Input — Incorrect. Inputs are the factors, such as labour and capital, used to produce the output; their cost is a part of TC, not what is left after TC is paid.

Note: A same/similar question was asked in CUET (UG) in the papers below.

* A similar question.