A firm pays a monthly lease of $10,000 and generates $8,000 ofrevenue a month. Which of the following is true?
A)Firms will enter the industry.
B)This firm will exit the industry in the long run.(True Answer )Correct
C)The recoverable costs are less than the difference between revenues and variable costs.
D)The recoverable costs are less than operating profit.

Question

Quizplus · Accepted Answer

The firm is incurring a monthly loss of $2,000 ($10,000 lease - $8,000 revenue). In the long run, the firm cannot sustain losses and will have to exit the industry unless it can increase its revenue or decrease its lease cost. Therefore, option B is the correct answer. Option A is incorrect because if firms enter the industry, it will increase competition and decrease profitability, making it even harder for this firm to survive. Option C is incorrect because recoverable costs are not relevant here, and Option D is incorrect because operating profit is positive in this scenario, which is not reflected in the statement.

A Firm Pays a Monthly Lease of $10,000 and Generates