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| Started By | Thread Subject | Replies | Last Post | ||
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| actsam | Normal Profit | 0 | Mar 27 2011, 9:15 PM EDT by actsam | ||
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Thread started: Mar 27 2011, 9:15 PM EDT
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I would be most grateful if someone could clarify the concept of normal profit for me. There seems to be somewhat different definitions in different texts. (But it is probably that I am not understanding it completely.) Some places seem to say that normal profit is the total economic profit expected from a firm in a particular industry in order to remain in business. Other places seem to say that it is the implicit cost of entrepreneurial talent supplied to a firm. But in the latter definition, the text I am reading from (Economics by Parkin, 8th ed.), the normal profit is just one part of the total economic cost. He also adds lost wages that the owner could supply in the next best job. But how can a business owner supply both entrepreneurial talent (by being the boss) and labor at the same time? Are we not double counting by considering the lost wages of the two next best jobs?
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