What is NORMAL PROFIT?

Profits that are earned in a perfectly competitive market, one that is required to attract and retain suppliers. Abnormally high or low profits will cause an unstable equilibrium due to an imperfect market system. As such the price of a good will be really high or really low. A perfectly competitive market is in a state of longterm equilibrium and as such the market will neither experience a shrinkage nor an expansion. Normal profits are equal to the opportunity costs involved in the production or supply of normal goods.

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