If firms are taking economic losses in the short run, firms will leave the industry, industry output will _____, and economic losses will _____ in the long run.

Question

Quizplus · Accepted Answer

In the long run, firms experiencing economic losses will exit the industry, leading to a decrease in industry output. As firms leave, the reduced supply will help eliminate economic losses, causing them to fall.

If Firms Are Taking Economic Losses in the Short Run