A firm’s total revenue exceeds its explicit costs by Rs 8 lakh. The normal profit, the minimum profit needed to keep the firm in this business, is Rs 5 lakh. The firm’s super-normal profit is:
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Rs 3 lakh
Super-normal profit is profit over and above normal profit.
Given:
Profit over explicit costs = Rs 8 lakh
Normal profit = Rs 5 lakh
Super-normal profit = 8 − 5 = Rs 3 lakh
Normal profit is the part that only keeps the firm in business; it counts as a cost of the firm. So only the Rs 3 lakh above it is super-normal.
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. …” |