Most Economists Agree That the Self-Correcting Mechanism Works

question 6

Multiple Choice

Most economists agree that the self-correcting mechanism works

• A)very slowly.
• B)very rapidly.
• C)rapidly in the short run and slowly in the long run.
• D)slowly in the short run and rapidly in the long run.

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Definitions:

Normal Profit

The minimum amount of profit required for a company to remain competitively active in the market; it is also the break-even point for a business.

Identical Firms

Companies within the same industry or market that offer products or services indistinguishable from one another to consumers.

Economic Profit

The difference between total revenue and total costs, including both explicit and implicit costs, reflecting the actual profitability of a firm beyond accounting profit.

Equilibrium

A state of balance in a market when the quantity demanded equals the quantity supplied, leading to no further incentive to change.