Which scenario is MOST likely to cause firms to exit an industry?
A)Consumer preferences for the product strengthen.
B)A technological advance allows firms to produce more efficiently.
C)The price of a key input falls.
D)Consumer incomes fall.

Question

Quizplus · Accepted Answer

If consumer incomes fall, it is likely that demand for goods and services will decrease. This decrease in demand can lead to lower revenues for firms in the industry, making it difficult for them to cover their costs and remain profitable. As a result, some firms may choose to exit the industry.

Which Scenario Is MOST Likely to Cause Firms to Exit