2f. Profit

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Last updated 10:34 AM on 9/28/23
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4 Terms

1
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What is meant by: Total Cost includes opportunity cost?

In economics, Total Cost doesn’t just include actual physical costs (e.g. raw materials, wages), it also includes opportunity cost (e.g. the opportunity cost of the manager’s time).

2
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What is meant by: Normal profit?

Normal profit is when TR = TC. The firm will just cover its opportunity cost, so it will stay in the market.

3
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What is meant by: Losses?

Losses are when TR is less than TC. The firm will make less than normal profit, so it will leave the market because it can’t cover its opportunity cost.

4
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What is meant by: Supernormal profit (also known as abnormal profit)?

Supernormal profit is when TR is greater than TC. The firm will make more than normal profit.