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Question: Explain the different ways that economist classify profits and consider whether it is possible to make profit from a newspaper that is distributed free. (12 Marks)

Answer: There are several types of profit consisting normal profit, abnormal profit and negative profit. Normal profit accrued when the business is breaking even. It is the minimum level of profit necessary to keep the firm’s operation. Normal profit is considered as a cost of production as the production will not continue without normal profit. Therefore, it is included in the firm’s total cost of production .Thus, normal profit is obtained when total revenue equals total cost.
Meanwhile, abnormal profit is any profit earned in excess of normal profit while negative profit brings harm for the firm as the total costs is greater than total revenue. Abnormal profit encourages risk taking while negative profit may caused the firm to collapse.
However, economist have seen further details in those profits. Their view of profit included both implicit and explicit costs which brings upon the e...(short extract)

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  • Subject: Economics
  • Course: Economics
  • Level: A-Level
  • Year: Not applicable
  • Mark: 100%
  • Words: 605
  • Date submitted: November 20, 2013
  • Date written: Not available
  • References: No
  • Document type: Essay*
  • Essay ID: 5204

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