In microeconomics normal profit is treated as as opportunity cost.why?
Lakshmi,
Normal profits refer to the level where the firm's Total Revenue (TR) is exactly equal to its Total Cost. Now, the Total Cost of a firm includes explicit cost as well as implicit cost. Explicit and implicit costs are the two concepts of economics costs and economic costs are actually opportunity costs. This means, when a firm's TR=TC, it is covering its explicit as well as implicit cost. Now, if the firm is covering its implicit cost, then it means that the firm has some incentive to continue production, which is generally referred as normal profit.
Normal profits refer to the level where the firm's Total Revenue (TR) is exactly equal to its Total Cost. Now, the Total Cost of a firm includes explicit cost as well as implicit cost. Explicit and implicit costs are the two concepts of economics costs and economic costs are actually opportunity costs. This means, when a firm's TR=TC, it is covering its explicit as well as implicit cost. Now, if the firm is covering its implicit cost, then it means that the firm has some incentive to continue production, which is generally referred as normal profit.