Answer to Question #33679 in Microeconomics for anusha
relation between economic rent & normal profit in the long run
Economic profit is the difference between price and average total cost. It can happen in the short run. In the long run, due to market entry, new producers with lower costs will enter the market, force the price and economic profit to go down. In the long run, the economic profit is supposed to be zero. Economic rent is the difference between price and average total cost due to the fact that the supply is constant because of rare raw material, government intervention, or quota etc. Such a limitation which has created economic rent which is not going away even in the long run.