When a firm earns less than a normal profit,

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When a firm earns less than a normal profit, it means that its revenues are not enough to cover all its explicit costs and the use of owner-supplied resources. This is known as an economic loss, and it indicates that the firm is not operating efficiently. Accounting profit may still be positive if it does not take into account all the costs, but economic profit is what matters from a long-term perspective. Normal profit is not negative, but rather represents the minimum level of profit necessary to keep a firm in business.

When a Firm Earns Less Than a Normal Profit