If economic losses are being earned in a perfectly competitive industry, some firms will exit the market in the long run. Therefore, the market demand curve will shift rightward and the market price will increase.

Question

Quizplus · Accepted Answer

In a perfectly competitive market, if firms exit due to economic losses, the market supply decreases, leading to an increase in price. The market demand curve does not shift; instead, the change in equilibrium is due to a shift in the supply curve.

If Economic Losses Are Being Earned in a Perfectly Competitive