The demand for clothing decreases.As a result,the price of clothing falls below the minimum possible average cost of producing it.In the long run,if the clothing industry is a perfectly competitive industry,
A) the price of clothing will fall.
B) the supply of clothing will increase.
C) some of the firms in the clothing industry are likely to go out of business.
D) there will be no effect on the supply of clothing.
E) firms will enter the clothing industry.

Question

Quizplus · Accepted Answer

If the price of clothing falls below the minimum possible average cost of producing it, firms in the clothing industry will experience losses. In the long run, firms that cannot cover their costs will have to exit the market. Therefore, some of the firms in the clothing industry are likely to go out of business. This will lead to a decrease in the supply of clothing.

The Demand for Clothing Decreases