Letters are used to represent the terms used to answer this question: price (P), quantity of output (Q), total cost (TC)and average total cost (ATC).Which of the following equations is equal to a firm's average profit?

Question

Quizplus · Accepted Answer

Average profit is calculated as total profit divided by quantity, which is (Total Revenue - Total Cost) / Quantity. Since Total Revenue is P × Q and Total Cost is TC, average profit is (P × Q - TC) / Q, which simplifies to P - ATC.

Letters Are Used to Represent the Terms Used to Answer