Profit Flashcards

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Questions and Answers

What is marginal benefit?

Change in benefit in response to a specific action

What is marginal cost?

The cost associated with one additional unit of production

What is marginal revenue?

The income received from selling one additional unit of a good or service

What does it mean to maximize?

To make as large as possible Signup and view all the answers

What is profit?

Income received from an economic action, minus the costs of taking the action Signup and view all the answers

What is revenue?

The total income received from an economic action Signup and view all the answers

To generate higher profit margins, producers must work to...

Decrease their production costs Signup and view all the answers

In order to calculate marginal cost, producers must compare the difference in the cost of producing one unit to the cost of...

Producing the next unit Signup and view all the answers

What is the difference between profit and revenue?

Revenue is the total amount producers receive after selling a good. Profit is the total amount producers earn after subtracting the production costs. Signup and view all the answers

What is the difference between marginal cost and marginal revenue?

Marginal cost is the money paid for producing one more unit of a good. Marginal revenue is the money earned from selling one more unit of a good. Signup and view all the answers

What is the total profit Brenda's Boards earns after selling 100 skateboards if each sells for $45 and expenses are $3 for wheels and mounts, $1 for the plastic board, $1 for the paint, and $10 for the labor?

$3,000 Signup and view all the answers

Profit equals the total amount of money made minus...

Expenses Signup and view all the answers

What is the best definition of marginal benefit?

The possible income from producing an additional item Signup and view all the answers

South Avenue Publishing produces self-help books. The company's profit is the...

Money the company earns after paying all of its production costs Signup and view all the answers

What is the best definition of marginal cost?

The price of producing one additional unit of a good Signup and view all the answers

Study Notes

Profit Concepts

Marginal Benefit: Refers to the additional benefit gained from a specific action taken, typically evaluated when considering producing one more unit.
Marginal Cost: Represents the cost incurred to produce one additional unit of a good, essential for assessing production efficiency.
Marginal Revenue: The income generated from the sale of one additional unit, crucial for understanding profit margins.

Profit and Revenue Distinctions

Profit: Calculated as total income received from economic activities minus the associated costs; indicates the financial success of an operation.
Revenue: The total income from sales before any costs are deducted; serves as a measure of financial performance before expenses.

Increasing Profit Margins

Producers can enhance profit margins by lowering production costs, thereby increasing the difference between revenue and expenses.

Understanding Production Calculations

To determine Marginal Cost, producers must analyze the difference in production costs between two units, focusing on the incremental expense added by producing one more unit.

Quiz Questions

Difference between Profit and Revenue: Revenue is the total sales income before costs; profit is what remains after costs are subtracted from revenue.
Difference between Marginal Cost and Marginal Revenue: Marginal cost is the expense of producing another unit; marginal revenue is the income derived from selling an additional unit.

Application Example

Brenda's Boards: Selling skateboards at $45 each with variable costs of $15 per unit (wheels, plastic, paint, labor) results in a total profit of $3,000 after selling 100 boards.
Profit Formula: Profit is calculated as total revenue minus total expenses, vital for businesses to gauge their financial health.

Additional Definitions

Marginal Benefit Definition: The potential income that may result from producing an additional unit of a good.
Marginal Cost Best Definition: Identified as the price involved in producing an additional unit, vital for resource allocation decisions.

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Description

Test your knowledge of key profit concepts through these flashcards. Each card presents a term related to profit and its corresponding definition, helping you to solidify your understanding of economic principles. Perfect for students and anyone looking to enhance their financial vocabulary.