CBSE Class 12-commerce Answered

The profit received by the firm is equal to the total revenue minus the total cost.

Profit = TR - TC, where TC is the sum of fixed cost and the variable cost.

Look at the diagram given above, the vertical distance between the TR and TC curves at the Q₁ output and gives the profit of a monopoly firm. Here, the vertical distance changes for different levels of output in the market.

When the output is above Q₄ and the output is below Q₂, the total cost curve lies above the total revenue curve. Firm incur loss when TC > TR.

Only at Q₁ level of output, firm maximise its profit.