The difference between economic profits and normal profits is that:
A)normal profits are earnings based on the normal competitive return to one's own labor;economic profits are the above-normal returns associated with prices that exceed competitive prices.
B)economic profits are earnings based on the normal competitive return to one's own labor;normal profits are the above-normal returns associated with prices that exceed competitive prices.
C)normal profits are earnings based on the normal competitive return to one's own labor;economic profits are the above-normal returns associated with prices that exceed monopolistic prices.
D)economic profits are earnings based on the noncompetitive return to one's own labor;normal profits are the above-normal returns associated with prices that exceed competitive prices.
E)None of the above is correct.

Question

Quizplus · Accepted Answer

Normal profits are the earnings based on the normal competitive return to one's own labor, while economic profits are the above-normal returns associated with prices that exceed competitive prices. The difference between the two is the excess earnings that a firm earns above what is necessary to cover its opportunity cost, including normal profits.

The Difference Between Economic Profits and Normal Profits Is That