When a firm earns zero economic profit, it is also earning normal profit.

Question

Quizplus · Accepted Answer

Zero economic profit occurs when total revenue equals total costs, including both explicit and implicit costs. Normal profit is the minimum amount of profit needed for a company to remain competitive in the market, which is considered an implicit cost. Therefore, when a firm earns zero economic profit, it means it is covering all its costs, including the opportunity cost of capital, thus earning normal profit.

When a Firm Earns Zero Economic Profit, It Is Also