If firms in a competitive market are NOT identical, then an increase in cost will

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Quizplus · Accepted Answer

If firms in a competitive market are not identical, there must be varying levels of efficiency and cost structures. An increase in cost will push the most inefficient firms out of the market as they will not be able to compete with the more efficient firms that can produce at lower costs. The more efficient firms will have a lower marginal cost and will therefore be able to continue operating despite the increase in cost.

If Firms in a Competitive Market Are NOT Identical, Then