When the macroeconomy is doing poorly (as it was in 2009),profits of existing firms decrease,creating an incentive for existing firms to exit unprofitable markets.This in turn makes it more difficult for the remaining firms to mark up price over average or marginal cost.

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When profits decrease, firms may exit unprofitable markets, reducing competition and making it easier for remaining firms to increase prices. However, if many firms exit, this can also result in oversupply and make it difficult for the remaining firms to mark up prices.

When the Macroeconomy Is Doing Poorly (As It Was in 2009),profits