When sellers exit a market in which the average seller has losses, what results?
A)The sellers that exit avoid the losses that the remaining market sellers continue to suffer.
B)The losses shrink or disappear as the market demand is spread over a smaller number of sellers.
C)The market demand shrinks as consumers avoid struggling sellers.
D)The remaining sellers have higher demand but also face cost curves that shift upward.

Question

Quizplus · Accepted Answer

When sellers exit a market in which the average seller has losses, the losses shrink or disappear as the market demand is spread over a smaller number of sellers. This is because the remaining sellers are able to capture a larger share of the market demand, which allows them to potentially cover their costs and even generate profits. Additionally, the reduced number of sellers in the market may also lead to reduced competition, which can further improve the profitability of the remaining sellers.

When Sellers Exit a Market in Which the Average Seller