# Intuitively, why is Profit = (Price $-$ Average Cost) $\times$ Quantity?

Sources: p 289, Principles of Microeconomics (7 Ed, 2014) by N G Mankiw
p 259, Modern Principles of Economics (2 ed, 2011) by Tyler Cowen, Alex Tabarrok

Definitions: Profit $:=$ Total Revenue $−$ Total Cost = TR $−$ TC

Total Revenue $:=$ Price $\times$ Quantity and Average Cost = $\dfrac{Total \, Cost}{Quantity}$

$\Rightarrow ... \Rightarrow$ $\color{darkred}{\text{ Profit = (Price$-$Average Cost)$\times$Quantity }}$

What's the intuition behind the last (reddened) equation for profit? I ask only for intuition; please omit any formal arguments or math proofs.

• This is the usual definition of profit (i.e. the excess of revenues over costs). Please help us understand what kind of "intuition" are you seeking. I honestly fail to see what is unclear in the fact that if I sell each unit for 10 and each unit has cost me on average 8, I earn an average profit of 2 per unit, and so my total profit will be 2 times the number of units sold? Jun 3, 2015 at 0:59

Example: You produce widgets at a constant marginal cost of \$1 per widget. You find it optimal to sell 10 widgets on the international widget market, where you can fetch \$1.05 per widget. You profit is the profit per unit of \$.05 times the 10 units you sold, summing to a total of \$0.50.