Lesson 3.3.4

3.3.4 Normal profits, supernormal profits and losses Quiz: Pearson Edexcel Economics, Unit 3

20 questions

Written by Revision Ninja · Last reviewed 11 October 2026

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Lesson 3.3.4, Normal profits, supernormal profits and losses: 20 multiple choice questions for the Pearson Edexcel Economics (9EC0), Unit 3: Theme 3: Business behaviour and the labour market, written with Revision Ninja.

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The 20 questions

  1. What is the minimum profit needed to keep resources in their current use long-term?

    • Gross profit
    • Supernormal profit
    • Subnormal profit
    • Normal profit

  2. Which profit type occurs when total revenue exceeds total economic cost?

    • Subnormal profit
    • Accounting profit
    • Normal profit
    • Supernormal profit

  3. What is the primary condition required for a firm to maximise profit?

    • MC equals MR
    • MC equals AC
    • AC equals AR
    • MR equals AR

  4. In the short run, a firm should shut down immediately if price falls below what?

    • Average variable cost
    • Average total cost
    • Average fixed cost
    • Marginal cost

  5. In the long run, a firm should exit the industry if price falls below what?

    • Average total cost
    • Average fixed cost
    • Marginal cost
    • Average variable cost

  6. A firm's total revenue is £5,000 and total cost including normal profit is £4,200. What is its supernormal profit?

    • £4,200
    • £800
    • £5,000
    • £9,200

  7. Price is £12, output is 500 units and average total cost is £10. What is total profit?

    • £5,000
    • £1,000
    • £6,000
    • £500

  8. At Q = 200, marginal revenue and marginal cost are both £8. Average total cost is £7. What is total profit?

    • £200
    • £8
    • £0
    • £1,600

  9. In the short run, what should a firm do if price covers variable cost but not total cost?

    • Continue producing
    • Shut down immediately
    • Exit the industry
    • Increase prices

  10. What happens to long-run profit in a competitive market when new firms enter due to supernormal profits?

    • Stays supernormal
    • Increases further
    • Falls to normal
    • Turns to loss

  11. What level of profit do perfectly competitive firms earn in long-run equilibrium?

    • Supernormal profit
    • Subnormal profit
    • Accounting profit
    • Normal profit

  12. A firm's selling price is £4 and its average variable cost is £5. What is its short-run decision?

    • Expand output
    • Increase prices
    • Continue producing
    • Shut down

  13. How is normal profit treated in economic analysis when calculating total cost?

    • As total turnover
    • As extra revenue
    • As a surplus
    • As a cost

  14. What equals marginal cost at the profit-maximising level of output?

    • Average revenue
    • Total revenue
    • Marginal revenue
    • Average cost

  15. What feature allows a monopoly to maintain supernormal profits in the long run?

    • Elastic demand
    • Productive efficiency
    • Barriers to entry
    • Low fixed costs

  16. A firm breaks even where total revenue is £8,000 and it sells 1,000 units. What is the price per unit?

    • £4
    • £80
    • £8
    • £16

  17. A firm sets MR = MC at output 400, with price £15 and average total cost £11. What is its total supernormal profit?

    • £6,000
    • £1,600
    • £400
    • £4,400

  18. In which time period can a firm remain operating while making a loss?

    • Long run
    • Very long run
    • Secular period
    • Short run

  19. Which market structure feature prevents new firms entering to erode supernormal profit?

    • Perfect information
    • Barriers to entry
    • Price-taking behaviour
    • Homogeneous goods

  20. A competitive firm's short-run supply curve is its marginal cost curve above which point?

    • Maximum MR
    • Minimum AVC
    • Minimum ATC
    • Minimum AFC

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