Asked by Carlos Iturralde on Jun 30, 2024
Verified
In a competitive industry buffeted by demand and supply shocks,prices increase and decrease,but economic profits tend to revert to zero.Hence,profits are exhibiting
A) Above-average return
B) Positive earnings
C) Mean reversion
D) None of the above
Economic Profits
Profits exceeding the opportunity costs of the inputs used in the production process, an indicator of efficiency and effectiveness in resource utilization.
Mean Reversion
Suggests that performance eventually moves back toward the mean or average.
Demand And Supply Shocks
Unexpected events that cause sudden and significant changes in the demand or supply of goods and services in the economy.
- Absorb the essence of economic profits and their movement to zero in the long-duration within competitive marketplaces.
- Explain how market prices adjust to shocks in supply and demand in competitive industries.
Verified Answer
Learning Objectives
- Absorb the essence of economic profits and their movement to zero in the long-duration within competitive marketplaces.
- Explain how market prices adjust to shocks in supply and demand in competitive industries.
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