The correct answer is: A. which compels an entrepreneur to remain in the same industry.
Normal profits are the minimum profits that an entrepreneur must earn in order to remain in the same industry. They are also known as risk-return profits or opportunity costs. Normal profits are necessary to cover the entrepreneur’s costs of production, including the cost of capital, the cost of labor, and the cost of materials. They also include a return on the entrepreneur’s investment, which is a reward for the risk that the entrepreneur takes in starting and running a business.
Option B is incorrect because it does not take into account the cost of capital. Option C is incorrect because it does not take into account the cost of labor. Option D is incorrect because profits are not fixed by the government.
Here is a more detailed explanation of each option:
- Option A: Normal profits are the minimum profits that an entrepreneur must earn in order to remain in the same industry. They are also known as risk-return profits or opportunity costs. Normal profits are necessary to cover the entrepreneur’s costs of production, including the cost of capital, the cost of labor, and the cost of materials. They also include a return on the entrepreneur’s investment, which is a reward for the risk that the entrepreneur takes in starting and running a business.
- Option B: Profits which are not more or less than 10 p.c. of the working capital. This option is incorrect because it does not take into account the cost of capital. The cost of capital is the cost of borrowing money to finance a business. It includes interest payments on loans and the cost of equity capital, which is the money that shareholders invest in a business.
- Option C: Profits which are not less or more than 10 p.c. of the total capital. This option is incorrect because it does not take into account the cost of labor. The cost of labor is the cost of hiring and paying employees. It includes wages, salaries, and benefits.
- Option D: Profits which are so fixed by the government. This option is incorrect because profits are not fixed by the government. The government may set a minimum wage, but it does not set a minimum profit.