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If a firm is earning only a normal profit, it is making economic profit it is economically breaking even it is suffering an economic loss it is covering only explicit costs it is covering only implicit costs

Ask by Bob Bradley. in the United States
Mar 14,2025

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If a firm is earning only a normal profit, it is economically breaking even.

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When a firm is earning only a normal profit, it means it is covering both its explicit costs (like wages and rent) and implicit costs (like the opportunity cost of using resources). Essentially, the firm is doing just well enough to stay in business without attracting new entrants or experiencing loss. This situation often occurs in perfectly competitive markets, where numerous firms compete, driving profits to normal levels. Firms are neither incentivized to leave the market nor to invest further, creating a stable but unexciting environment.

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