By the end of this section you should be able to:
- Describe economic profit as the case where total revenue exceeds economic cost.
- Describe normal profit as the amount of revenue needed to cover the costs of employing self-owned resources (implicit costs, including entrepreneurship) or the amount of revenue needed to just keep the firm in business.
- Explain that economic profit is profit over and above normal profit, and that the firm earns normal profit when economic profit is zero.
- Explain why a firm will continue to operate even when it earns zero economic profit.
- Explain the meaning of loss as negative economic profit arising when total revenue is less than total cost.
- Calculate different profit levels from a set of data and/or diagrams.
- Explain the goal of profit maximization where the difference between total revenue and total cost is maximized or where marginal revenue equals marginal cost.
- Describe alternative goals of firms, including revenue maximization, growth maximization, satisficing and corporate social responsibility.