Economic Profit

Economic Profit

Economic Profit and International Trade Economy

In relation to international trade economy, Christopher Mark (1993) provided the following definition of Economic Profit: The amount by which a producer's income exceeds total operating costs, including the cost of capital provided by the firm's owners. A zero economic profit means a firm is earning the normal, economy-wide rate of profit in the accounting sense, with investors receiving a rate of return no greater than the return their capital could earn elsewhere in the economy. Positive economic profits will typically attract new entrants (domestic and/or foreign) to the industry .Protectionism may be the response of domestic firms seeking to prevent such entry by foreign competitors, transforming a competitive industry to an oligopoly. Persistent negative economic profits can lead to a shakeout.



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