A perfectly competitive firm initially is earning zero economic profit. Then, a decrease in demand for the firm's product occurs. Of the following, in the long run which action listed below is the firm most likely to take?

Question

Quizplus · Accepted Answer

In the long run, if a perfectly competitive firm is earning zero economic profit and then experiences a decrease in demand, it will likely exit the market as it cannot sustain losses indefinitely.

A Perfectly Competitive Firm Initially Is Earning Zero Economic Profit