Question

when total revenue minus total cost is equal to zero, the firm is:
a. earning abnormally low profits.
b. earning above - average economic profit.
c. losing too much money to stay in business.
d. earning a normal profit.

Explanation:

Economic profit is defined as total revenue minus total cost (including implicit opportunity costs). When this value equals zero, the firm is covering all its costs, including the normal return on resources, which is referred to as earning a normal profit. Options a, b, and c are incorrect: a zero economic profit is not abnormally low, it is not above-average profit, and the firm is not losing money as all costs are covered.

Answer:

d. earning a normal profit.