ECONOMICS
PROFIT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Yes, I understand this from the notes
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No, I don’t understand this from the notes
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No, I don’t understand this, as I have not read the notes
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None of the above
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Detailed explanation-1: -Normal profit is defined as the minimum reward that is just sufficient to keep the entrepreneur supplying their enterprise. In other words, the reward is just covering opportunity cost-that is, just better than the next best alternative. If a firm makes more than normal profit it is called super-normal profit.
Detailed explanation-2: -In economics, abnormal profit, also called excess profit, supernormal profit or pure profit, is “profit of a firm over and above what provides its owners with a normal (market equilibrium) return to capital.” Normal profit (return) in turn is defined as opportunity cost of the owner’s resources.
Detailed explanation-3: -A business will be in a state of normal profit when its economic profit is equal to zero, which is why normal profit is also called “zero economic profit.” Normal profit occurs at the point where all resources are being efficiently used and could not be put to better use elsewhere.
Detailed explanation-4: -There are three main measures of profit. These are gross profit, operating profit and net profit.