The exit of firms from a market,ceteris paribus,
A)Shifts the market supply curve to the right.
B)Has no effect on the economic losses of remaining firms in the market.
C)Increases the equilibrium price in the market.
D)Shifts the market demand curve to the left.

Question

Quizplus · Accepted Answer

The exit of firms from a market leads to a decrease in the market supply, shifting the supply curve to the left. This reduces competition and increases the market power of the remaining firms, allowing them to increase their prices and increase their economic profit. Therefore, the equilibrium price in the market increases as a result of firms exiting. Choices A, B, and D are incorrect because they do not accurately describe the effects of firms exiting a market.

The Exit of Firms from a Market,ceteris Paribus