Abnormal profit


Abnormal profit

In economics supernormal profit, also called economic rent, abnormal profit or pure profit or excess profits, is a profit exceeding the normal profit. Normal profit equals the opportunity cost of labour and capital, while supernormal profit is the amount exceeds the normal return from these input factors in production.

Abnormal profit is usually generated by an oligopoly or a monopoly; however, these firms often try to hide this from the market to reduce risk of competition or antitrust investigation.

In principle there are three kind of supernormal profit:
*Monopoly rent
*Resource rent
*Intramarginal rent

ee also

*War profiteering
*Windfall profits
*Excess profits tax

References


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