Normal profits refer to
A) fixed costs.
B) variable costs.
C) the accounting profit that would correspond to zero economic profit.
D) positive economic profits.
E) zero accounting profits.

Question

Quizplus · Accepted Answer

Normal profits refer to the accounting profit that would correspond to zero economic profit. In other words, normal profits are the minimum level of profit required to keep a business operating in the long run. It covers both explicit costs (such as wages, rent, and materials) and implicit costs (such as the opportunity cost of the entrepreneur's time and foregone income from the next best alternative use of resources). Therefore, a business earning normal profits is just earning enough to cover all of its costs, including opportunity costs, but not generating any excess profits above and beyond the minimum required to stay in business.

Normal Profits Refer to