If normal rate of return falls while average profit and capital employed remain same what happens to normal profit?

Correct answer: Normal profit will decrease

Normal profit is calculated by applying the normal rate of return to capital employed: normal profit = capital employed × normal rate of return. Since capital employed remains constant, a fall in the rate directly reduces the calculated normal profit. Average profit remaining unchanged does not alter this conclusion; it is used separately when determining super profit by comparing actual or maintainable profit with normal profit. Therefore option B is correct. Option A reverses the effect, option C ignores the multiplication relationship, and option D confuses normal profit with goodwill, which is an intangible business value rather than a profit figure.