Suppose a product suddenly loses popularity and the firms producing the product begin to realize large losses. As firms exit the market, the equilibrium price in the market will
A) decrease and make the remaining firms stay in business.
B) decrease further while making the remaining firms realize profits again.
C) increase and make the remaining firms stay in business.
D) decrease further and push more firms out of business.

Question

Quizplus · Accepted Answer

As firms exit the market due to losses, the supply decreases, leading to an increase in the equilibrium price, which can help the remaining firms stay in business.

Suppose a Product Suddenly Loses Popularity and the Firms Producing