Firms will stop exiting an market only when

Question

Quizplus · Accepted Answer

Firms will continue to exit a market until the remaining firms are making zero economic profit. At this point, there is no incentive for firms to exit or enter the market since they are only earning a normal rate of return on their investment. If firms were continuing to make an economic profit, new firms would enter the market, driving down prices and reducing profits until firms were only making a normal rate of return. If firms were making a loss, existing firms would continue to exit until the remaining firms were making zero economic profit. Therefore, option D is the correct answer.

Firms Will Stop Exiting an Market Only When