If firms are making economic losses, then in the long run:
A)the short-run industry supply curve will shift rightward.
B)new firms will enter the industry.
C)industry output will rise, and the price will rise.
D)firms will leave the industry.

Question

Quizplus · Accepted Answer

If firms are making economic losses, they are likely to exit the industry in the long run to avoid further losses. As a result, the industry supply curve will shift leftward, and the price will rise to a level where remaining firms can earn normal profits. This process will continue until the industry reaches a long-run equilibrium, where there are no more economic profits or losses. Therefore, option D is the best choice.

If Firms Are Making Economic Losses, Then in the Long