excess profita PROFIT greater than that which is just sufficient to ensure that a firm will continue to supply its existing product or service (see NORMAL PROFIT). Short-run (i.e. temporary) above-normal profits resulting from an imbalance of market supply and demand promote an efficient allocation of resources if they encourage new firms to enter the market and increase market supply. By contrast, long-run (i.e. persistent) above-normal profits (MONOPOLY or supernormal profits) distort the RESOURCE ALLOCATION process because they reflect the overpricing of a product by monopoly suppliers protected by BARRIERS TO ENTRY.
See PERFECT COMPETITION.