Profit (economics)

In economics, the term profit has two related but distinct meanings. Normal profit represents the total opportunity costs (both explicit and implicit) of a venture to an entrepreneur or investor, whilst economic profit (also abnormal, pure, supernormal or excess profit, as the case may be monopoly or oligopoly profit, or simply profit) is, at least in the neoclassical microeconomic theory which dominates modern economics, the difference between a firm's total revenue and all costs, including normal profit.^[1] In both instances economic profit is the return to an entrepreneur or a group of entrepreneurs. Economic profit is thus contrasted with economic interest which is the return to an owner of capital stock or money or bonds.^{[citation needed]} A related concept, sometimes considered synonymous in certain contexts, is that of economic rent - economic profit can be considered as entrepreneurial rent.^{[citation needed]}

Other types of profit have been referenced, including social profit (related to externalities). It is not to be confused with profit in finance and accounting, which is equal to revenue minus only explicit costs,^[1] orsuperprofit, a concept in Marxian economic theory. Indeed, the dominant definition of the term today - and the one in use in this article - should be differentiated from that of the previously dominant school ofclassical economics, which defined profit as the return to the employer of capital stock (such as machinery, factories, and ploughs) in any productive pursuit involving labor. The definitions of neo- and classical theory are actually, however, equivalent, if one considers that profits return to those who invested (financial) capital.^{[citation needed]}