This blog has been created to provide an area for economics students to read about how economics impacts daily life. It is especially useful for students to understand the application of macroeconomics as communicated through the media and governmental websites.

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Brief description: If the level of average revenue is above the average cost, then the firm will make a supernormal profit.

Detailed description: The level of profit is shown on the diagram by the difference between average cost (AC) and average revenue (AR). Where AR is greater than AC then the firm will make a supernormal profit. The gap between AR and AC is the supernormal profit per unit and to get the total profit you need to multiply by the level of output. This area is shown on the diagram.