A competitive firm will exit an industry in the long run if the market price falls below the firm's break-even price.

Question

Quizplus · Accepted Answer

A firm will only continue to operate in the industry if it is able to cover its costs, including the opportunity cost of production. If the market price falls below the firm's break-even price, it will not be able to cover its costs and will eventually exit the industry to avoid further losses.

A Competitive Firm Will Exit an Industry in the Long