Assume the market for orange juice is perfectly competitive. Orange juice producers currently earn a zero economic profit. Orange juice producers will likely begin to incur economic losses in the short run, and some producers will exit the industry until those remaining earn a zero economic profit, if consumers
A) switch from grape juice to orange juice.
B) switch from orange juice to grape juice.
C) do not change their demand for orange juice.
D) All of the above are correct.

Question

Quizplus · Accepted Answer

In a perfectly competitive market, producers earning zero economic profit are in a state of equilibrium. If consumers switch from orange juice to grape juice, demand for orange juice decreases. This leads to a decrease in the price of orange juice, causing producers to incur losses. Some producers will exit the industry until the supply decreases enough that the price rises back to the level where the remaining producers earn zero economic profit again.

Assume the Market for Orange Juice Is Perfectly Competitive