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Question
Normal profits for a firm imply that the firm is breaking even. Explain.
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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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