Read the following statements - Assertion (A) and Reasoning (R) in respect of the given graph:
Assertion (A): Between output levels q1 and q0, firm will be earning losses.
Reasoning (R): When total revenue is greater than total cost, losses are earned.
Answer & explanation
Correct answer: option 3
Between output levels q1 and q0, firm will be earning supernormal profits, since total revenue is greater than total cost. When total revenue is greater than total cost, profits are earned.