Chapter 45

Question 1

Define abnormal profit.

Answer 1

Abnormal profit is the profit over and above normal profit.

Question 2

What is the break even point?

Answer 2

The level of output where total revenue equal total cost.

Question 3

At what point is profit maximised?

Answer 3

Profit is maximised at a level of output where the difference between total revenue and total cost is greatest. At this point, marginal cost is equal to marginal revenue.