--%>
Assignment Help - homework help

Normal profit

Normal profit signifies zero economic profit. Explain why?

E

Expert

Verified

Answer: Assume that the existing firms are earning over normal profits. Attracted by the positive gains, the new firms enter in industry. The market supply rises and the price comes down. New firms carry on entering and the price persists to fall till economic profits are decreased to zero.

In condition of losses, firms begin leaving the industry, supply downs and prices begins going up and all this carry on till losses are wiped out. Remaining firms in industry then once again earn only normal profits or zero profit.

   Related Questions in Microeconomics

  • Q : Problem on Supply of Labor Can someone

    Can someone help me in finding out the right answer from the given options. The time in which people are willing and capable to work at different wage rates throughout a specific period is termed as the: (1) Labor force participation rate. (2) Supply of labor. (3) Mar

    		•
  • Q : Compute price elasticity At price of

    At price of Rs. 20 the unit quantity demanded is 300 units. Its price downs by 10% its quantity demanded rises by 60 units. Compute price elasticity. Answer: <

    		•
  • Q : Effect of Increase in per capita income

    Rises in per capita income in the United States would be most probable to reduce the: (i) Demands for lard, pinto beans, and utilized tires. (ii) Excesses in the federal govt. budget. (iii) Supply of untrained labor relative to skilled labor. (iv) Tot

    		•
  • Q : Illustration of transaction costs You

    You are more probable to shop at a remote farmers’ market quite than buy apples at a local grocery store while: (w) possible, since produce is cheaper at the farmers’ market. (x) you would like to buy only vegetables and fruits. (y) the opportunity costs o

    		•
  • Q : What is the meaning of ex-ante savings

    Meaning of ex-ante savings: Ex-ante savings are expected savings or planned savings.

    		•
  • Q : Annual payments of financial investment

    When the interest rate is 5 percent and a financial investment produces annual payments of $50,000, in that case the present value of this asset is as: (w) $1,000,000. (x) $5,000,000. (y) $500,000. (z) $10,000,000.

    		•
  • Q : Interest Rate Reinvestment Risk Explain

    Explain the term Interest Rate Reinvestment Risk in detail?

    		•
  • Q : Analytic Time-The Long Run Can someone

    Can someone please help me in finding out the accurate answer from the following question. Alfred Marshall classification of analytical time specified that in long run it is: (i) Not possible to differ technology and at least one resource is fixed and hence at least o

    		•
  • Q : Competitive Markets and Labor unions I

    I have a problem in economics on Competitive Markets-Labor unions. Please help me in the following question. The purely competitive labor markets are not characterized through: (1) Most of the individual buyers and sellers of the labor services. (2) S

    		•
  • Q : Unexpected inventory growth of price

    These supply and demand curves within the sugar market specify that: (w) a price floor of P0 for sugar will cause a surplus. (x) a price ceiling of P2 will cause a shortage. (y) the market clears while quantity equals Q0

    		•