Final answer:
Profit is most accurately defined as total revenue minus total cost, also known as accounting profit. It includes all explicit costs for a firm, while economic profit also subtracts implicit costs. Average profit, or profit margin, is calculated as price minus average cost.
Step-by-step explanation:
The correct definition of profit in the context of economics and business is total revenue minus total cost. This is known as accounting profit, which includes all explicit costs such as wages, salaries, rent, and materials. Explicit costs are also known as out-of-pocket costs. Economic profit takes this a step further by also subtracting implicit costs -- these are not directly paid out-of-pocket but represent opportunity costs. Knowing the difference between these types of profits is important for understanding a firm's financial health. If we look at average profit, it's the firm's profit margin, which is the price minus average cost. This implies that when the market price is higher than the average cost, the firm will have a positive profit margin and thus a positive total profit.