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# Extraordinary Profits Analysis

## Definition

The examination of profits that exceed the normal competitive rate, typically resulting from monopolies, bounties, or other market distortions. Smith argues that such profits represent an inefficient allocation of resources that reduces overall economic welfare.

## Source Chapter

Book IV, Chapter 6

## Context

Smith analyzes extraordinary profits as evidence of market distortion, arguing that they indicate inefficient resource allocation that could be corrected through free competition.

## Economic Domain

Exchange

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