In microeconomics, normal profit is the return for entrepreneurship. From a company's perspective, normal profit is actually an expense: it's the minimum compensation that the owner(s) expect to receive for the effort they put into making the firm work. If a firm can't give its owners a normal profit, they sell or dissolve the firm and do something else for a living.

Accountants file normal profit under the firm's implicit costs, and any additional profit the firm makes turns into economic profit, a euphemism for what most of us would call "icing on the cake." Economists classify normal profit as a type of opportunity cost, because it is essentially the cost of a foregone alternative (owning another firm, or working for a living).

If a market is perfectly competitive, then normal profit is the only profit a firm makes. Why? If the industry is profitable (in the sense of economic profit), more companies will start up in that industry, and average profit drops. If the industry isn't profitable, companies will start to leave the industry, and average profit rises. Therefore, theoretically, an equilibrium forms around a state of zero economic profit.

In practice, competition rarely reaches this level. Most firms seek a super-normal profit so that they can make their owners fantabulously rich. However, the rise of global agricultural markets and other mechanisms has made certain industries increasingly competitive: sometime in the not-too-distant future, we might see an economy where investors are only looking to put Pellegrino on the table.

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