Apr 21 2012

Normal Profit

Published by at 7:53 pm under

The implicit cost faced by the owner of a business firm. A business owner will wish to cover all of his explicit costs (wages, rents and interest payment), but also earn a “normal” level of profit in order to remain in a market in the long run. If a normal level of profit is not enjoyed by the entrepreneur, he will shut down his business and re-allocated his resources into another industry in which a higher level of profit can be earned. Normal profit is a cost, because if it is not earned, a firm will eventually shut down.

About the author:  Jason Welker teaches International Baccalaureate and Advanced Placement Economics at Zurich International School in Switzerland. In addition to publishing various online resources for economics students and teachers, Jason developed the online version of the Economics course for the IB and is has authored two Economics textbooks: Pearson Baccalaureate’s Economics for the IB Diploma and REA’s AP Macroeconomics Crash Course. Jason is a native of the Pacific Northwest of the United States, and is a passionate adventurer, who considers himself a skier / mountain biker who teaches Economics in his free time. He and his wife keep a ski chalet in the mountains of Northern Idaho, which now that they live in the Swiss Alps gets far too little use. Read more posts by this author

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