Candidates should be able to:

[ ] Distinguish between revenues of price-taking and price-making firms.
[ ] Differentiate between normal profits, supernormal profits and economic losses.
[ ] Understand how firms maximize profits.

Definitions

Total revenue	The amount earned from the sale a product over a specific period of time
Average revenue	The firm's total earnings per unit sold
Marginal revenue	The additional total revenue generated by selling one more unit
Normal profit	Arises when total revenue and total cost are equal
Supernormal or abnormal profit	Profit above and beyond the normal profit i.e., the profit above the opportunity costs of the resources the firm used in production
Economic loss	When total revenue is less than total costs
Price taker	A firm that must accept the price that the market as a whole sets
Price maker	A firm that has the freedom to set the selling price for its product or service despite a downward-sloping demand curve