Answer to Question #200779 in Economics for Owais

Question

Q2) What are normal and abnormal loss in perfectly competitive environment? Discus with the help of graph.

Answer 1

Abnormal profit or loss is profit or loss of a firm over and above what provides its owners with a normal (market equilibrium) return to capital.

Normal profit or loss in turn is defined as opportunity cost of the owner's resources, and is reached when economic profit/loss is zero.