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Legal Dictionary
  • Abnormal Profits
Abnormal Profits
Abnormal profits means a profits that exceed the amount a firm must receive to become capable of continuing the production. Persistence of abnormal profits in an industry will attract new firms to the business. As a result, the supply will increase and prices will fall which in turn will bring the profit of the business to normal profits. Imposition of conditional barriers for entering into a new business can make the abnormal profits remain in the long-run. It is also called as supernormal profit or economic profit.