The difference between economic profits and normal profits is that:
A) normal profits are earnings based on the normal competitive payments to the factors used in production; economic profits are the above-normal returns associated with prices that exceed competitive prices.
B) economic profits are earnings based on the normal competitive payments to the factors used in production; normal profits are the above-normal returns associated with prices that exceed competitive prices.
C) normal profits are earnings based on the normal competitive payments to the factors used in production; economic profits are the above-normal returns associated with prices that exceed monopolistic prices.
D) economic profits are earnings based on the noncompetitive payments to the factors used in production; normal profits are the above-normal returns associated with prices that exceed competitive prices.
E) None of these answers is correct.

Question

Quizplus · Accepted Answer

Normal profits are the minimum earnings necessary to keep a producer in their current line of production, while economic profits represent earnings above and beyond what is necessary to keep the producer in business. This distinction is based on the difference between the competitive price for the factors of production (normal profits) and the actual price received by the producer (economic profits).

The Difference Between Economic Profits and Normal Profits Is That