Profit, Supernormal and Subnormal

Question 1

What are the two physical costs?-explicit costs

Answer 1

TFC and TVC

Question 2

what is the implicit cost?

Answer 2

oppurtunity cost

Question 3

Does economic profit consider implicit and explicit costs?

Answer 3

yes

Question 4

What does accounting profit consider?

Answer 4

they only consider explicit cost

Question 5

give an example about how this concept works?

Answer 5

E.g
There is a production of laptops and tablets
Let’s say Company A produces £100,000 laptops and £100,000 tablets
Let’s say Company B produces £11,000 laptops and £100,000 tablets
Let’s say Company C produces £90,000 laptops and £100,000 tablets
Economic profit considers both costs so you just take the difference
A- £0 Normal profit
B-£10,000 Supernormal profit
C-£10,000- Subnormal profit

Question 6

Define normal profit?

Answer 6

Normal profit is the minimum level of profit required to keep the factors of production in use.

Question 7

What happens if the firm produces less than normal profit?

Answer 7

If you produce anything less than normal profit switch the CELL to produce OC like laptops or tablets