Economic profit refers to the total revenue earned by a firm minus both explicit and implicit costs. It measures the profitability of a business after considering all costs, including opportunity costs.
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Accounting Profit: Accounting profit only considers explicit costs (e.g., wages, rent) and does not include implicit costs like opportunity cost.
Normal Profit: Normal profit is the minimum level of profit needed for a firm to stay in business. It covers both explicit and implicit costs.
Supernormal Profit: Supernormal profit refers to profits that exceed normal profits. It indicates that a firm is earning more than what is necessary to cover all costs.