normal profit

normal profit definition - business

normal profit

In economics, the return an entrepreneur expects from a particular investment in order to commit funds and remain in the business. Normal profit is a function of the risk of the investment plus the return that can be earned on a risk-free investment. Returns higher than a normal profit will attract additional entrepreneurs and increase competition, while returns below a normal profit will cause firms to leave the industry and invest their funds elsewhere.

The American Heritage® Dictionary of Business Terms Copyright © 2009 by Houghton Mifflin Harcourt Publishing Company. Published by Houghton Mifflin Harcourt Publishing Company. All rights reserved.

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