s in which the resources could have been used and the cost of foregoing that use. In this sense, "normal" profit is similar to accounting profit with the difference that "normal" profit uses opportunity costs while accounting profit uses explicit costs (Salemi 4).
Supernormal profit, also called economic profit, is the residual of accounting profit (total revenue less total explicit costs) minus normal profit (Griffiths & Ison 33). This assumes that there is greater profit than the normal profit; hence the term "supernormal." Supernormal profit is thus an indicator that a company's opportunity costs are relatively low. As with accounting profit, supernormal profit can be increased by increasing revenues more rapidly than costs, or decreasing costs, and are particularly associated with monopolies (Jain et al 415).
It is important to consider the issue of economic rent, as well, when considering supernormal profit. Economic rent is the residual from a payment when the amount of the payment exceeds the owner's reservation price. This is used in conjunction with factors of production. In this way, when demand increases for a good but th
...