A firm will exit a competitive market when

Question

Quizplus · Accepted Answer

A firm will exit a competitive market in the long run if it anticipates that its long-run profit would be negative, indicating that it cannot cover its costs, including both variable and fixed costs. Earning a zero long-run profit (normal profit) is actually the condition under which firms in perfect competition neither enter nor exit the market, as it indicates they are covering all their costs, including a normal return on investment.

A Firm Will Exit a Competitive Market When