When market conditions in a price-taker market are such that firms cannot cover their production costs,
A) the firms will suffer long-run economic losses.
B) the firms will suffer short-run economic losses that will be exactly offset by long-run economic profits.
C) some firms will go out of business, causing prices to rise until the remaining firms can cover their production costs.
D) all firms will go out of business, since consumers will not pay prices that enable firms to cover their production costs.

Question

Quizplus · Accepted Answer

In a price-taker market, if firms cannot cover their production costs, some firms will exit the market, reducing supply and causing prices to rise until the remaining firms can cover their costs.

When Market Conditions in a Price-Taker Market Are Such That