(in the accounting sense of the excess of revenue over cost) sum of two components: normal profit and economic profit
accounting profit
book profit
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In economics, profit in the accounting sense of the excess of revenue over cost is the sum of two components: normal profit and economic profit. All understanding of profit should be broken down[by whom?] into three aspects: the size of profit, the portion of the total income, and the rate of profit (in comparison to the initial investment).[citation needed] Normal profit is the profit that is necessary to just cover the opportunity costs of an owner-manager or of a firm's investors. In the absence of this profit, these parties would withdraw their time and funds from the firm and use them to better advantage elsewhere. In contrast, economic profit, sometimes called excess profit, is profit in excess of what is required to cover the opportunity costs. The enterprise component of normal profit is the profit that a business owner considers necessary to make running the business worth his or her while, i.e., it is comparable to the next-best amount the entrepreneur could earn doing another job. In particular, if enterprise is not included as a factor of production, it can also be viewed as a return to capital for investors including the entrepreneur, equivalent to the return the capital owner could have expected (in a safe investment), plus compensation for risk. Normal profit varies both within and across industries; it is commensurate with the riskiness associated with each type of investment, as per the risk-return spectrum. Only normal profits arise in circumstances of perfect competition when long-run economic equilibrium is reached; there is no incentive for firms to either enter or leave the industry. Profits can be theorized by the phenomena of equilibrium or disequilibrium. These phenomena have the ability to retain its[which?] activity as static or dynamic. Economic variables such as effects of size, share or rate, or source of profits are determined by these theories.
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Economic Profit
Economic profits
Normal profit
Economic profit
Supernormal profits
Subnormal profit
Normal Profit
Excessive profits
Excess profit
Excessive profit
Economic profitability
Normal economic profit
Elements of economic profit
Monopolistic profit
Normal profits
Personal gain
Abnormal profits
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