above-normal profit

above-normal profit

or

excess profit

a 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.

References in periodicals archive ?
It also continues to make above-normal profit margins - expected to be around 27% this year, compared with 7.
The main one involves changing the tax base from shareholder income to above-normal profits, or rents.
Shareholder income includes a normal risk-adjusted return plus any above-normal profits or rents.
Our main recommendation is to change the current CIT from one based on shareholder income to one based on above-normal profits or rents.
Based on the literature review, we developed a simple framework that incorporates a Disruption Contingency Plan (DCP) to provide business continuity and opportunity to increase market share in the event of supply chain disruptions, thus creating normal or above-normal profits.
Disruption Contingency Plan <[equivalent to]> Business Continuity + Market Share <[equivalent to]> Normal or Above-Normal Profits
2]EJK) and above-normal profits and, by the same token, other firms are experiencing smaller producer surplus and below-normal profits (suffering economic losses).
s above-normal profits deserve applause and not ridicule.
If so, though, it's something of a problem to call such above-normal profits "monopoly profits" and to insist that Acme Co.
Indeed, the very efficiencies that LTCM and its competitors brought to the overall financial system gradually reduced the opportunities for above-normal profits.
Since all above-normal profits would be competed away, prices should be aligned with cost now to remove the incentive for entry.
This challenge is suspect because if a market is competitive, above-normal profits, whatever their origin, should be driven down to a competitive level.