Which of the following pairs is correctly matched?

Answer & explanation

Correct answer: option 3

The correct answer is Option (3) → Profit that a firm earns over and above the normal profit — Super-normal profit

Super-normal profit is profit over and above normal profit.

Option (1) Point on the supply curve at which a firm earns only normal profit — Shut down point — Incorrect. This point is the break-even point.

Option (2) Point of minimum AVC where the SMC curve cuts the AVC curve — Break-even point — Incorrect. This point is the short run shut down point.

Option (3) Profit that a firm earns over and above the normal profit — Super-normal profit — Correct. This is the meaning of super-normal profit.

Option (4) Minimum level of profit needed to keep a firm in the existing business — Super-normal profit — Incorrect. This is normal profit.

NCERT (2026-27): “4.4.4 The Normal Profit and Break-even Point The minimum level of profit that is needed to keep a firm in the existing business is defined as normal profit. A firm that does not make normal profits is not going to continue in business. Normal profits are therefore a part of the firm’s total costs. It may be useful to think of them as an opportunity cost for entrepreneurship. Profit that a firm earns over and above the normal profit is called the super-normal profit. In the long run, a firm does not produce if it earns anything less than the normal profit. In the short run, however, it may produce even if the profit is less than this level. The point on the supply curve at which a firm earns only normal profit is called the break-even point of the firm. The point of minimum average cost at which the supply curve cuts the LRAC curve (in short run, SAC curve) is therefore the break-even point of a firm.”

“4.4.3 The Shut Down Point … Therefore, along the supply curve as we move down, the last price-output combination at which the firm produces positive output is the point of minimum AVC where the SMC curve cuts the AVC curve. Below this, there will be no production. This point is called the short run shut down point of the firm. …”