When firms earn below normal rates of return
A) they raise their prices to increase their profits.
B) they tend to stay in the industry in anticipation of other firms leaving the industry.
C) they tend to leave the industry and seek profits elsewhere.
D) they are still breaking even economically.

Question

Quizplus · Accepted Answer

When firms earn below normal rates of return, they are likely to leave the industry and seek profits elsewhere, as staying would mean continuing to earn less than what could potentially be earned in other markets or industries.

When Firms Earn Below Normal Rates of Return