The concept of mean reversion is defined by
A)the tendency of profits to revert to zero
B)the tendency of costs to revert to zero
C)the tendency of economic profits to revert to zero
D)the tendency of profits to revert to negative

Question

​The concept of mean reversion is defined by
A)​the tendency of profits to revert to zero
B)the tendency of costs to revert to zero
C)the tendency of economic profits to revert to zero
D)​the tendency of profits to revert to negative

Quizplus · Accepted Answer

Mean reversion refers to the tendency of economic profits to revert to zero over time. This means that in the long run, companies that are earning high profits will face competition, which will drive down their profits, while companies with low profits may improve their operations or find new market opportunities that help them increase their profits. Eventually, these companies will converge towards average profits in their industry.

​The Concept of Mean Reversion Is Defined by

The Concept of Mean Reversion Is Defined by