What is the difference between profit and revenue?
A. Revenue is the total amount producers receive after selling a good. Profit is the total amount producers earn after subtracting the production costs.
B. Revenue is the total amount producers earn after subtracting the production costs. Profit is the total amount producers receive after selling a good.
C. Revenue is the total amount producers pay to manufacture a good. Profit is the total amount producers earn after subtracting the production costs.
D. Revenue is the total amount producers pay to manufacture a good. Profit is the total amount producers receive after selling a good.
Answer (1)
Revenue represents the total income from sales.
Profit is the income remaining after deducting production costs from revenue.
The correct answer states that revenue is the total amount received from selling goods, while profit is the revenue minus production costs.
Therefore, the correct statement is: Revenue is the total amount producers receive after selling a good. Profit is the total amount producers earn after subtracting the production costs.
Explanation
Understanding the Definitions Let's analyze the definitions of revenue and profit to determine the correct answer.
Revenue Revenue is the total amount of money a producer receives from selling goods or services. It represents the gross income before any expenses are deducted.
Profit Profit, on the other hand, is the amount of money a producer earns after subtracting all the costs associated with production (e.g., materials, labor, overhead) from the revenue. It represents the net income.
Conclusion Based on these definitions, the correct statement is:
Revenue is the total amount producers receive after selling a good. Profit is the total amount producers earn after subtracting the production costs.
Examples
Understanding the difference between revenue and profit is crucial in business. For example, if a bakery sells cakes for $20 each, and they sell 100 cakes, their revenue is $2000. However, if the cost of ingredients, labor, and rent totals $1200, their profit is $2000 - $1200 = $800. Knowing both revenue and profit helps the bakery make informed decisions about pricing and cost management.
