Final answer:
Total revenue is the total money received from the sale of a product, calculated by multiplying the price of the product by the quantity sold. It is different from profit as it does not subtract the costs involved in producing and selling the product, which are considered under total cost.
Step-by-step explanation:
Total revenue represents c) Total money received from the sale of a product. Explaining in detail, total revenue is a crucial concept in both economics and business that signifies the total income a firm generates from selling its goods or services. It is calculated by a simple formula: Total Revenue = Price x Quantity. Essentially, if a product is sold at a certain price, and a specific number of units of that product are sold, multiplying these two figures will yield the total revenue generated from those sales.
It is important to distinguish total revenue from profit, as it does not account for the costs associated with producing and selling the product; that would be the realm of total cost. Total cost includes all the expenditures a firm faces in the course of producing and selling goods, such as raw materials, labor, marketing, and distribution costs. The difference between total revenue and total cost will give us the profit or loss. This differentiation is particularly important because a business can have high total revenue but still incur a loss if its total costs exceed this revenue.
In the context of demand, revenue is a function of the demand for the firm's products. This implies that the amount of revenue generated will change based on how much or how little the product is in demand. Businesses strive to maximize their total revenue by finding the optimal balance between the price of their products and the quantity sold. Understanding total revenue helps businesses in making critical decisions, such as setting prices, determining production levels, and planning strategies for expansion.