Normal profit, Normal profit signifies zero economic profit. Explain why?

Normal profit

Normal profit signifies zero economic profit. Explain why?

Comments & Conversion

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 : Define cost Cost : This refers to the

Cost: This refers to the money expenses acquired on the production of a specified amount of commodity.

Q : Factors affecting the demand curve of

Can someone help me in finding out the right answer from the given options. Among the factors influencing the demand curve for lime flavored Doritos is the: (i) Supply of lime-flavored Doritos. (ii) . Income of snack lovers. (iii) Production costs for the Doritos (iv)

Q : Marginal cost due to technology Due to

Due to enhancement of technology, the marginal costs of televisions encompass vanished. How will it influence the supply curve of television? Answer: Supply curve w

Q : Burden of tax reduce solely on

The burden of an excise (i.e., per unit) tax would reduce solely upon suppliers of the taxed good within: (w) Panel A. (x) Panel B. (y) Panel C. (z) Panel D.

Q : Predatory behaviour in increase price

Predatory behavior would not comprise: (w) lowering prices. (x) expanding output. (y) rapid technological innovation. (z) raising prices. Can anybody suggest me the proper explanation for given problem regarding

Q : Shut Down Point of monopolist A

A monopolist will shut down within the short run while its equilibrium price as: (1) equals short-run average cost. (2) exceeds marginal cost. (3) is less than average variable cost. (4) is less than average fixed cost.

Q : Opportunity Cost to the User An

An opportunity cost to the user, although not to society as an entire, which would be the: (w) accounting profits realized by a firm of CPAs. (x) interest paid by a borrower for a bank loan. (y) rent paid by a sharecropper to a plantation owner. (z) m

Discover Q & A

Leading Solution Library

Avail More Than 1441202 Solved problems, classrooms assignments, textbook's solutions, for quick Downloads

No hassle, Instant Access

Start Discovering

18,76,764

1947485
Asked

3,689

Active Tutors

1441202

Questions
Answered

Start Excelling in your courses, Ask an Expert and get answers for your homework and assignments!!

Submit Assignment