Super-normal profit occurs when:

Question

BlackTom AI · Accepted Answer

Super-normal profit refers to a situation where a firm earns more than the “normal” return on its resources — in other words, economic profit is positive.

1) Relevant concepts
- Total revenue (TR): money received from sales.
- Explicit costs: out-of-pocket costs (wages, materials, rent).
- Implicit costs: opportunity costs of owner-supplied resources (forgone wages, alternative returns).
- Accounting profit = TR − explicit costs.
- Economic profit = TR − (explicit costs + implicit costs) = accounting profit − implicit costs.
- Normal profit = economic profit of zero. Super-normal (or above-normal) profit = economic profit > 0.

2) Step-by-step reasoning
- Start with definitions: accounting profit = TR − explicit; economic profit = TR − explicit − implicit.
- Super-normal profit means the firm’s return exceeds its opportunity costs, so economic profit > 0.
- Algebraically: economic profit > 0 implies TR − explicit − implicit > 0.
- Rearranged: accounting profit − implicit > 0, so accounting profit > implicit cost. That condition produces positive economic profit.

3) Intermediate calculation example
- Suppose TR = 100, explicit costs = 70, implicit costs = 20.
- Accounting profit = 100 − 70 = 30.
- Economic profit = 100 − 70 − 20 = 10 > 0.
- Because economic profit is positive (10), the firm earns super-normal profit.

4) Why the correct answer is correct
- By definition in microeconomics, super-normal profit is exactly the condition where economic profit is positive. Economic profit accounts for both explicit and implicit costs and measures returns over opportunity costs; a positive value indicates returns above normal.

5) Why the other options are incorrect
- (a) Accounting profit is zero: This does not imply economic profit is positive; with implicit costs > 0, economic profit would be negative.
- (b) Economic profit is zero: That is normal profit, not super-normal profit.
- (c) Accounting profit is positive: This can occur while economic profit is zero or negative (if implicit costs are large); it is not sufficient to guarantee super-normal profit.

6) Conclusion
Therefore the correct choice is d. economic profit is positive, which matches the provided answer.

Super-normal profit occurs when:Single choice

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