Suppose a perfectly competitive market is in a long-run equilibrium when a permanent decrease in the market demand occurs. In the long run, which of the following definitely occurs?

Question

Quizplus · Accepted Answer

In the long run, a permanent decrease in market demand will lead to some firms exiting the market, reducing the number of firms, as the market adjusts to the new equilibrium where firms can no longer cover their average total costs.

Suppose a Perfectly Competitive Market Is in a Long-Run Equilibrium