To answer the question, let's define the two critical terms: revenue and profit.
### Definitions
1. Revenue:
Revenue refers to the total amount of money that producers receive from the sale of goods or services. It is the gross income generated by the sale of goods before any expenses are subtracted.
2. Profit:
Profit is the financial gain that producers make after deducting the costs associated with producing and selling the goods or services. It is calculated by subtracting the total production costs from the total revenue.
### Explanation
- Revenue:
- Think of revenue as the total money that comes in after selling the goods or services.
- It does not take into account any costs incurred while producing these goods or services.
- For example, if you sell 100 units of a product at [tex]$10 each, your revenue is $[/tex]1000 (100 units * [tex]$10/unit).
- Profit:
- Profit focuses on the actual earnings after all the production and operational expenses have been covered.
- To find profit, you subtract the total costs (such as material, labor, overheads, etc.) from the total revenue.
- For instance, if the production cost for those 100 units is $[/tex]600, then your profit would be [tex]$400 ($[/tex]1000 revenue - $600 costs).
### Conclusion
To summarize:
- Revenue is the total amount producers receive after selling a good.
- Profit is the total amount producers earn after subtracting the production costs from the revenue.
From the given choices:
1. Revenue is the total amount producers receive after selling a good. Profit is the total amount producers earn after subtracting the production costs.
2. Revenue is the total amount producers earn after subtracting the production costs. Profit is the total amount producers receive after selling a good.
3. Revenue is the total amount producers pay to manufacture a good. Profit is the total amount producers earn after subtracting the production costs.
4. Revenue is the total amount producers pay to manufacture a good. Profit is the total amount producers receive after selling a good.
The correct answer is the first one:
Revenue is the total amount producers receive after selling a good. Profit is the total amount producers earn after subtracting the production costs.
