normal profit



Minimum profit necessary to attract and retain suppliers in a perfectly competitive market (see perfect competition). Only normal profit could be earned in such markets because, if profit was abnormally high, more competitors would appear and drive prices and profit down. If profit was abnormally low, firms would leave the market and the remaining ones would drive the prices and profit up. Markets where suppliers are making normal profits will neither expand nor shrink and will, therefore, be in a state of long-term equilibrium.
Normal profit typically equals opportunity cost.

Use normal profit in a sentence

  • You need to make sure that you are always at least achieving the normal profit for all the time and effort you put in.

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  • The normal profit was generated quickly so we were able to make new business relationships with many different and great suppliers.

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  • I wondered what our normal profit rate would be if I went ahead and allowed the new items on the floor.

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