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Q: What do you call profits earned by a business firm over and above the opportunity cost of the factor inputs?
  • A. Normal Profit
  • B. Optimum Profit
  • C. Abnormal Profit
  • D. Regulated Profit
Correct Answer: Option C - The profit earned by a business firm over and above the opportunity cost of the factor inputs is called Abnormal profit. It is a profit of a firm over and above what provided its owners with a normal return to capital. So an abnormal profit is a profit beyond to continue production that is needed for the firm.
C. The profit earned by a business firm over and above the opportunity cost of the factor inputs is called Abnormal profit. It is a profit of a firm over and above what provided its owners with a normal return to capital. So an abnormal profit is a profit beyond to continue production that is needed for the firm.

Explanations:

The profit earned by a business firm over and above the opportunity cost of the factor inputs is called Abnormal profit. It is a profit of a firm over and above what provided its owners with a normal return to capital. So an abnormal profit is a profit beyond to continue production that is needed for the firm.