If some firms in a perfectly competitive industry earn less than a zero economic profit, the industry's market supply curve will decrease in the long run.

Question

Quizplus · Accepted Answer

In a perfectly competitive market, if firms are earning less than zero economic profit (i.e., they are incurring losses), some firms will exit the industry in the long run. This reduction in the number of firms decreases the total quantity of goods supplied at any given price, leading to a leftward shift in the market supply curve.

If Some Firms in a Perfectly Competitive Industry Earn Less