Supernormal profit
Definition. Supernormal profit, also called abnormal or economic profit, is the profit a firm earns over and above normal profit, arising when total revenue exceeds total economic cost including the opportunity cost of the entrepreneur. It exists where average revenue is greater than average cost at the profit maximising output.
In the long run, barriers to entry are needed to protect supernormal profit, since in their absence new firms would enter and compete it away until only normal profit remains.
This term belongs to Barriers to Entry in A Level Economics. Read the full chapter for the diagrams, worked examples and exam technique.
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