Abnormal Profits Law and Legal Definition

Abnormal profits means a profits that exceed the amount a firm must receive to become capable of continuing the production. Persistence of abnormal profits in an industry will attract new firms to the business. As a result, the supply will increase and prices will fall which in turn will bring the profit of the business to normal profits. Imposition of conditional barriers for entering into a new business can make the abnormal profits remain in the long-run. It is also called as supernormal profit or economic profit.