If a firm makes normal profit, the entrepreneur must earn a wage that
A) is at least as much as he can earn elsewhere
B) must be less than he can earn elsewhere
C) equals the economic profit generated by the firm
D) lowers the opportunity cost of finding alternative work
E) is enough for him to live on

Question

Quizplus · Accepted Answer

Normal profit occurs when the total revenues of a business are equal to its total costs, including the opportunity cost of capital and the wages the entrepreneur could earn elsewhere. Therefore, for a firm to make a normal profit, the entrepreneur's wage must be at least as much as he could earn in an alternative employment, reflecting the opportunity cost of his time and investment.

If a Firm Makes Normal Profit, the Entrepreneur Must Earn