A normal rate of profit ?
Correct answer: B. is the rate that is just sufficient to keep owners or investors satisfied.
- A. Is the rate of return on investments over the interest rate on risk-free government bonds.
- B. is the rate that is just sufficient to keep owners or investors satisfied.
- C. is the difference between total revenue and total costs
- D. is zero in a perfectly competitive industry.
Explanation
Normal profit is the minimum return required to keep owners and investors in the business, including their opportunity costs. It is therefore an economic cost rather than an excess profit.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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