Firms leave a competitive industry in the long run when
A)price is less than the minimum of marginal cost.
B)price is less than the minimum of average variable cost.
C)the return on investment is less than 10 percent.
D)price is less than the minimum of average total cost.
E)price is equal to the minimum of average total cost.

Question

Quizplus · Accepted Answer

In the long run, firms will leave a competitive industry when the price is less than the minimum of average total cost. At this point, the firm is not earning enough revenue to cover all of its costs, including both variable and fixed costs. As a result, the firm will eventually go out of business if it continues to operate in the industry.

Firms Leave a Competitive Industry in the Long Run When