A competitive firm will exit the industry in the long run if the price of its product falls below its average cost.

Name: A competitive firm will exit the industry in the long run if the price of its product falls below its average cost.
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Question

Quizplus · Accepted Answer

If the price falls below the average cost, the firm will not be able to cover its costs and will operate at a loss. If it continues to operate at a loss, it will eventually exhaust its resources and exit the industry.

A Competitive Firm Will Exit the Industry in the Long