Normal Supernormal and subnormal profit Flashcards
1
Q
Normal profit definition
A
A minimum level of profit required to keep factors of production in their current use
2
Q
Super normal profit definition
A
Any profit made above the level of normal profit (economic profit)
3
Q
Subnormal profit definition
A
Any economic profit below normal profit i.e and economic loss (Profit being made is not enough to cover the opportunity cost of production)
4
Q
Profit equation
A
TR-TC
5
Q
What is included in the total cost
A
(explicit) Physical costs (TFC and TVC) - accountants view
(Implicit) Opportunity cost of production - Economists view
6
Q
What is meant by economic profit
A
Consider both implicit and explicit costs
7
Q
What is meant by accounting profit
A
Considers on explicit costs
