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Question
Normal profits for a firm imply that the firm is breaking even. Explain.
Solution
Normal profit is the minimum profit which is required by the organiser to continue the production. This is part of the total cost of production for a firm. The break-even point is the point where TR = TC, i.e., neither loss nor profit. A firm enjoys normal profit when the total revenue of the firm is enough to cover its costs, since normal profit is a part of the total cost.
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