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The economist's profit, abnormal profit, is the profit which is above that needed to keep the firm in business long term. When we talk of a firm breaking even, the firm is making just enough profit to stay in business long term.

With elastic demand

A firm will produce at the output solution point (or profit maximisation point) when MC = MR.

MC is drawn as a tangent to TC. The maximum profit is the vertical difference between TR and MC when the two are parallel.

With downward sloping demand

When an industry has imperfect competition, a firm's demand curve slopes downwards. In this case the TR is curved. MR is the tangent of TR. Profit is maximised at the point where the vertical distance between MC and MR is the greatest.

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