Question

Firm gets profit when

• A. AR>AC
• B. AC>AR
• C. AR = AC
• D. None of these

Hint:

Profit is simple: you make a profit when Revenue per unit (AR) is greater than Cost per unit (AC).

Answer 1

The Correct Option is A

In economics, a firm's profit is determined by comparing its revenue and costs per unit of output.

AR (Average Revenue): The revenue per unit sold (which is typically equal to the price).
AC (Average Cost): The cost per unit produced.
The conditions are:

If AR>AC, the firm is earning super-normal profit.
If AR = AC, the firm is earning normal profit (break-even point).
If AC>AR, the firm is incurring a loss.
Thus, a firm gets profit (super-normal profit) when its average revenue exceeds its average cost.