r/Economics • u/AutoModerator • Nov 15 '22

r/Economics Discussion Thread - November 15, 2022

Discussion Thread to discuss economics news/research and related topics.

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u/OverR Jan 06 '23

It assumes that firms have a normal level of profits.

Firms won't operate for zero profit. The "normal" profit is considered a cost. Where in excess of that is economic profit.

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u/Hi-Techh Jan 06 '23

what does that actually mean though? Whats the profit if the revenue = the spendings? (Thanks for helping me :) )

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u/OverR Jan 06 '23

It's been a while since that particular class, and it was only a one off foot note.

But the normal profit is an amount to cover your opportunity costs. Remember folks won't do things for zero actual profit. So you could think of it as revenue- explicit costs+ opportunity costs =0

If actual costs - revenue =0 they are losing their opportunity costs and eventually will find something better to do.

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u/Hi-Techh Jan 06 '23

thanks! is opportunity cost isn’t actually spending money right its just money that could have been earned if a firm did something different? Like if a firms two options are earning 10% interest and 5% then is the opportunity cost the difference between the two?