What is the difference between reasonable profits and economic profits?

Profit generally is the making of gain in business activity for the benefit of the owners of the business. The word comes from Latin meaning "to make progress," is defined in two different ways, one for economics and one for accounting.Profit may refer to:Profit (accounting) Profit (economics) Pure economic profit is the increase in wealth that an investor has from making an investment, taking into consideration all costs associated with that investment including the opportunity cost of capital.A key difficulty in measuring profit is in defining costs. Pure economic monetary profits can be zero or negative even in competitive equilibrium when accounted monetized costs exceed monetized price.Profit is the factor income of the entrepreneur. The definition may be explained in the following manner: There are four factors of production: land, labour, capital and organization. The corresponding reward of the factors are rent, wage and salary, interest and finally profit. From this the definition follows.In economics, a firm is said to be making a normal profit when total revenues equal total costs. These normal profits then match the rate of return that is the minimum rate required by equity investors to maintain their present level of investment. Economically, the "normal profit" is thus treated as a cost, and recognized as one of the two components of the cost of capital. In the short run, a firm will continue producing whilst making subnormal profit, as long as their AVC (Average Variable Costs) are covered.An economic profit arises when its revenue exceeds the total (opportunity) cost of its inputs, noting that these costs include the cost of equity capital that is met by "normal profits." A business is said to be making an accounting profit if its revenues exceed the accounting cost of the firm. Economics treats the normal profit as a cost, so when deducted from total accounting profit what is left is economic profit (or economic loss).All enterprises can be stated in financial capital of the owners of the enterprise. The economic profit may include an element in recognition of the risks that an investor takes. It is often uncertain, because of incomplete information, whether an enterprise will succeed or not. This extra risk is included in the minimum rate of return that providers of financial capital require, and so is treated as still a cost within economics. The size of that return is commensurate with the riskiness associated with each type of investment, as per the risk-return spectrum."Normal profits" arise in circumstances of perfect competition when economic equilibrium is reached. At equilibrium, average cost equals marginal cost at the profit-maximizing position. Since normal profit is economically a cost, there is no economic profit at equilibrium. In a single-goods case, a positive economic profit happens when the firm's average cost is less than the price of the product or service at the profit-maximizing output. The economic profit is equal to the quantity of output multiplied by the difference between the average cost and the price.Economic profit does not occur in perfect competition in long run equilibrium. Once risk is accounted for, long-lasting economic profit is thus viewed as the result of constant cost-cutting and performance improvement ahead of industry competitors, or an inefficiency caused by monopolies or some form of market failure.Positive economic profit is sometimes referred to as supernormal profit or as economic rent.The social profit from a firm's activities is the normal profit plus or minus any externalities that occur in its activity. A firm may report relatively large monetary profits, but by creating negative externalities their social profit could be relatively small.Profitability is a term of economical efficiency. Mathematically it is a relative index – a fraction with profit as numerator and generating profit flows or assets as denominator.Accounting profit is the difference between price and the costs of bringing to market whatever it is that is accounted as an enterprise (whether by harvest, extraction, manufacture, or purchase) in terms of the component costs of delivered goods and/or services and any operating or other expenses.A key difficulty in measuring profit is in defining costs. Pure economic monetary profits can be zero or negative even in competitive equilibrium when accounted monetized costs exceed monetized price.In the accounting sense of the term, net profit (before tax) is the sales of the firm less costs such as wages, rent, fuel, raw materials, interest on loans and depreciation. Costs such as depreciation, amortization, and overhead are ambiguous. Revenue may also be ambiguous when different products are sold as a package, or "bundled." Within US business, the preferred term for profit tends to be the more ambiguous income.[1]Gross profit is profit before Selling, General and Administrative costs