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Perfect competition: Normal profits

Normal profit is equal to the best return that the firm's self-owned, self-employed resources could earn elsewhere. It can be regarded as the minimum payment required by the owner of the firm to stay in the particular business. Normal profit includes the cost of the owner's time and capital and is included in the firm's economic costs. If an economist therefore talks about the cost of doing business, he or she would include the normal profits that must be paid to the owners to keep them in the particular business.
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