As firms exit an industry, the industry supply curve shifts __________ and the equilibrium price __________ until long-run competitive equilibrium is established and the surviving firms are earning __________ economic profits.

Question

Quizplus · Accepted Answer

When firms exit an industry, the supply decreases, causing the supply curve to shift leftward. This reduction in supply leads to an increase in the equilibrium price. Over time, the market adjusts to a new equilibrium where the remaining firms earn zero economic profits, as normal profit conditions are restored in a competitive market.

As Firms Exit an Industry, the Industry Supply Curve Shifts