The correct answer is C. total profit is maximised.
When the TR curve and TC curve moves in parallel and TR exceeds TC, it means that the firm is making a profit. The amount of profit is equal to the area between the TR and TC curves. The higher the TR curve is above the TC curve, the greater the profit.
Normal profit is the minimum amount of profit that a firm must make in order to stay in business. It is equal to the opportunity cost of the firm’s resources. Abnormal profit is profit that is above normal profit. It is also known as economic profit.
When the TR curve and TC curve moves in parallel and TR exceeds TC, the firm is making abnormal profit. This is because the firm is earning more than the minimum amount of profit that it needs to stay in business.
The following is a brief explanation of each option:
- A. normal profit is maximised. This is not possible, as normal profit is a fixed amount and cannot be maximised.
- B. abnormal profit is maximised. This is the correct answer, as the firm is earning more than the minimum amount of profit that it needs to stay in business.
- C. total profit is maximised. This is the correct answer, as the firm is earning a profit.
- D. total profit is minimised. This is not possible, as a firm cannot make a loss if the TR curve and TC curve moves in parallel.