Economic profit and economic loss, Microeconomics

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Economic profit and Economic loss:

Economic profit is the excess if total revenue over total cost when the latter includes both explicit and implicit costs. It is the type of profit when made by firms in an industry attracts new firms into the industry when no barriers to entry exist while existing firms also expand their production.It is also called pure or supernormal profit.

Economic Loss is the excess of total cost (both implicit and explicit) over total revenue. This type of loss when made by firms in an industry would discourage firms which are unable to cover their variable costs to exit the industry while those who are able to cover their variable costs to exit the industry while those who are able to cover their variable costs to exit the industry while those who are able to cover their variable costs will stay in the short run.


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