If a firm makes an economic profit, it is making at least a normal rate of return.

Question

Quizplus · Accepted Answer

Economic profit is calculated by subtracting both explicit and implicit costs from total revenue. A normal rate of return, often considered an implicit cost, is the minimum profit necessary for a company to remain competitive in its market. Therefore, if a firm is making an economic profit, it means it has covered all its costs, including the normal rate of return, and has additional earnings beyond that.

If a Firm Makes an Economic Profit, It Is Making