Types and Determination of Profit are defined below
a) Normal profit
Definition - Minimum level of revenue which will ensure the firm to stay in the business.
- Also called as breakeven in accounting.
- obtain when AR = AC at the benefit maximising output.
b) Supernormal profit
Definition - It is the excess profit which will ensure the firm to remain in the business.
- Also called as profit in accounting.
- It is obtain when AR > AC at the profit maximising output.
Definition - Earnings which is less than what is needed to remain in the business.
- Also known as loss in accounting.
- Obtain when AC > AR at the loss minimising output.
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