Suppose a product suddenly loses popularity and the firms producing the product begin to realize large losses. In response, entrepreneurs would:

Question

Quizplus · Accepted Answer

When a product loses popularity and firms start to realize large losses, it is an indication of oversupply in the market. In response, entrepreneurs would exit the market and decrease production to reduce the oversupply and promote price stability. Entering the market or increasing production would only exacerbate the oversupply and result in further losses.

Suppose a Product Suddenly Loses Popularity and the Firms Producing