Super-normal profit occurs when:

Question

BlackTom AI · Accepted Answer

The question asks about the condition under which super-normal profit occurs. Here are the options analyzed in turn to understand the concept clearly.
Option a: 'economic profit is zero' This would mean normal profit is earned—economic profit equals zero. It is not super-normal; it reflects just covering the opportunity costs. So this choice describes normal profit, not super-normal profit.
Option b: 'economic profit is positive' This indicates that total revenue exceeds all explicit and implicit costs, i.e., the firm earns more than normal profit. This is precisely the definition of super-normal (or abnormal) profit in many economic models. It corresponds to a positive economic profit.
Option c: 'accounting profit is positive' Accounting profit subtracts only explicit costs from revenue and ignores implicit costs. A positive accounting profit can occur even when economic profit is negative or zero, so it does not define super-normal profit. Hence this is not the correct criterion.
Option d: 'accounting profit is zero' If accounting profit is zero, the firm covers explicit costs but not necessarily implicit costs, and economic profit could still be negative or positive depending on implicit costs. This does not capture the essence of super-normal profit either.
In summary, the key distinction is between economic profit and accounting profit. Super-normal profit is tied to a positive economic profit, which exceeds all costs including opportunity costs. Therefore, the statement that aligns with super-normal profit is that economic profit is positive.

MUF0061 Economics Unit 1 - Semester 2, 2025

Super-normal profit occurs when:

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