To calculate profit, producers subtract total costs from total income.
This is a basic premise of cost theory. Total revenue is obtained by multiplying the price by the quantity sold. The total cost is the multiplication of the cost of each unit by the quantity.
Profit is the decrease in revenue by cost.
The producers calculate the total profit by substracting their total production cost from their total income/revenue.
The total profits are defined as money remaining with the producers when they deduct the entire production cost from their revenue earnings. Hence, it is said as a percentage of total revenue that is left with the business.
Therefore, the computation of profit is as below:
[tex]P=TR-TC[/tex]
Here, P is the profits and TR is total revenue which is derived by multiplying price with total sold quantity. TC is the total cost which is obtained by multiplying the cost by quantity.
Learn more about the calculation of profit here:
https://brainly.com/question/22849921
