Often called abnormal profit, is when a firms total sales revenue exceed the total costs of production i.e. they are earning a profit above and beyond the level of normal profit. This is the level of profit that a firm can enjoy after meeting the main production costs.
The diagram below illustrates how a monopolist exploits its monopoly power to enjoy supernormal profits. By charging a price above the marginal cost the monopolist extracts a level of sales revnue equal to the blue shaded box (P*Q). However, this is not the level of profit that firms receive as they have to cover the costs that go towards producing this product i.e. normal profit. Once the costs have been taken away from the sales revenue, any revenue left over is counted as supernormal profit - as this is the money that firms are able to use flexibly for any part of the business.
