If a perfectly competitive firm is producing the short- run profit- maximizing quantity and is earning negative economic profits, the firm should anticipate _______ .

Question

Quizplus · Accepted Answer

In the short run, if a perfectly competitive firm is producing the profit-maximizing quantity but earning negative economic profits, it indicates that the price is below the average total cost. This situation may lead to some firms exiting the market to avoid losses, which would decrease the market supply. As supply decreases, the price is likely to increase, potentially leading to a return to normal profits for remaining firms.

If a Perfectly Competitive Firm Is Producing the Short- Run