Final answer:
When (revenues - expenses) equals profits, it means that the total revenue generated by a business is greater than the total expenses incurred.
Step-by-step explanation:
When (revenues - expenses) equals profits, it means that the total revenue generated by a business is greater than the total expenses incurred. In other words, the business is making a positive financial gain. The formula to calculate profit is Profit = Total Revenue - Total Cost.
For example, if a company earns $1 million in revenue and has $600,000 in expenses, the profit would be $400,000 ($1,000,000 - $600,000).
Maximizing profits involves finding the point where marginal revenue equals marginal cost, which ensures the business is producing the optimal amount and maximizing financial gain.