Asked by Pooja Attri on Jun 27, 2024
Verified
Normal profit is:
A) determined by subtracting implicit costs from total revenue.
B) determined by subtracting explicit costs from total revenue.
C) the return to the entrepreneur when economic profits are zero.
D) the average profitability of an industry over the preceding 10 years.
Normal Profit
The minimum amount of earnings that entrepreneurs must achieve to cover the cost of operating, essentially the breakeven point beyond which a business earns profit.
Implicit Costs
Indirect expenses related to business operations, such as opportunity costs, not directly paid out in cash.
Economic Profits
The excess of total revenue over total costs, including both implicit and explicit costs.
- Acquire knowledge on how economic profit, accounting profit, and normal profit are interconnected.
Verified Answer
JS
Jaden SmithJun 27, 2024
Final Answer :
C
Explanation :
Normal profit is the minimum level of profit necessary to keep an entrepreneur in business. It is the return to the entrepreneur when economic profits are zero, meaning that all explicit and implicit costs are covered.
Learning Objectives
- Acquire knowledge on how economic profit, accounting profit, and normal profit are interconnected.