Question

what is the difference between normal , abnormal profirt ?

Answer 1

Profit can be defined as excess of total revenue over total cost (profit = TR - TC). A normal profit means a firm’s revenue is exactly equal to its cost( i.e a firm is neither making profits nor losses). It is acondition of zero profit (TR=TC). On the other hand if there is any difference in the revenue over cost usually revenue being more than the cost, then it is said to be abnormal profit (TR>TC). In a perfectly competitive market, a company is assumed to earn normal profits only while in imperfect competition market, firms make some abnormal profits.