In a competitive industry buffeted by demand supply shocks,prices increase and decrease,but economic profits tend to revert to zero.Hence,profits are exhibiting

Question

Quizplus · Accepted Answer

The phenomenon described is known as "mean reversion," where economic profits tend to shift towards zero over time due to competitive pressures. This suggests that while prices may fluctuate, long-term profitability is unlikely to be sustained at above-average levels. Therefore, the correct answer is C, mean reversion.

In a Competitive Industry Buffeted by Demand Supply Shocks,prices Increase