Match List-I with List-II
| List-I | List-II | ||
| (A) | Normal profit | (I) | Minimum level of profit needed by firm to be in business. |
| (B) | Shut down point | (II) | Minimum level of LRAC curve |
| (C) | Break-even point | (III) | Profit Over and above normal profit |
| (D) | Super-normal profit | (IV) | The point on which firm earns only normal profit. |
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → (A)-(I), (B)-(II), (C)-(IV), (D)-(III)
A firm judges its profit against normal profit. Economists count normal profit as part of the firm’s total costs.
| List-I | List-II | Reason |
|---|---|---|
| (A) Normal profit | (I) Minimum level of profit needed by firm to be in business. | Normal profit is the minimum profit needed to keep a firm in its existing business. |
| (B) Shut down point | (II) Minimum level of LRAC curve | In the long run, a firm does not produce below the minimum of the LRAC curve. So this is its shut down point. (In the short run, it is the minimum of AVC.) |
| (C) Break-even point | (IV) The point on which firm earns only normal profit. | Here price equals average cost. The firm earns only normal profit, so this is its break-even point. |
| (D) Super-normal profit | (III) Profit Over and above normal profit | Profit earned over and above normal profit is called super-normal profit. |
Note: One item of List-I can be matched with more than one entry of List-II:
(C) Break-even point → both (II) and (IV). The break-even point is at the point of minimum average cost, where the supply curve cuts the LRAC curve. So it is also the minimum level of the LRAC curve.
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. … Profit that a firm earns over and above the normal profit is called the super-normal profit. … 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. In the long run, however, the shut down point is the minimum of LRAC curve.” |