Normal Profit

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DEFINITION of 'Normal Profit'

When economic profit is equal to zero; this occurs when the difference between total revenue and total cost (explicit and implicit costs) equals zero. Normal profit is different than accounting profit because opportunity cost is taken into consideration.

Normal profit is the minimum level of profit needed for a company to remain competitive in the market.

Also known as "economic profit".

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BREAKING DOWN 'Normal Profit'

Normal profit occurs at the point at which the resources available to the firm are being efficiently used and could not be put to better use elsewhere. It is important to note that zero economic profit does not mean that the company is not earning any money (accounting profit). It is simply a measure of how well resources are being used relative to all possible options.

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