In a market system, if ﬁrms in an industry persistently earn total revenues that are less than total costs, then that industry will
A) have some ﬁrms go out of business.
B) attract more resources toward it.
C) experience entry of new ﬁrms.
D) get government protection from failure.

Question

Quizplus · Accepted Answer

When firms in an industry consistently earn total revenues that are less than their total costs, it indicates that the industry is not profitable. As a result, some firms will be unable to cover their costs and will likely go out of business. This is a natural market mechanism to eliminate inefficiencies and reallocate resources to more profitable sectors.

In a Market System, If ﬁRms in an Industry Persistently