When firms leave an industry,
A)it is due to long-term losses.
B)other firms immediately enter to take their place.
C)it is because they anticipate an increase in demand.
D)other firms enter.
E)it is always due to a decrease in demand.

Question

Quizplus · Accepted Answer

Firms do not usually leave an industry unless they are experiencing long-term losses. If it were due to a temporary decrease in demand, the firms would likely stay and wait for demand to increase again. Therefore, option E is incorrect. Even though other firms may eventually enter the industry, it is not an immediate or guaranteed outcome, making option B and D incorrect. Option C is also incorrect as firms do not usually leave an industry if they anticipate an increase in demand.

When Firms Leave an Industry