What is abnormal profit?

Abnormal profit, also known as economic profit, refers to the excess profit a firm earns over and above the normal profit, which is the minimum return necessary to keep resources in their current use. This profit occurs when total revenue exceeds total costs, including both explicit and implicit costs. Abnormal profit indicates that a firm is outperforming its competitors and may attract new entrants into the market. It is often seen as a sign of market power or a competitive advantage.