Graph 17-4

-Refer to Graph 17-4. Which of the markets depicted in each panel is likely to see firms exit in the long run?

Question

Graph 17-4
 
-Refer to Graph 17-4. Which of the markets depicted in each panel is likely to see firms exit in the long run?

Quizplus · Accepted Answer

In panel B, the market is in a state of excess supply, as the quantity supplied (Q2) is greater than the quantity demanded (Q1). This means that there is downward pressure on price, and firms are likely to experience reduced profits or even losses. In the long run, some firms may exit the market in order to reduce the excess supply and increase prices.

Graph 17-4 -Refer to Graph 17-4. Which of the Markets Depicted in the Markets