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 at its profit-maximizing quantity but earning negative economic profits, it indicates that the price is below the average total cost. This situation typically leads to some firms exiting the market, which decreases the market supply, leading to an increase in the market equilibrium price until firms are earning zero economic profit.

If a Perfectly Competitive Firm Is Producing the Short- Run