When existing firms leave a perfectly competitive industry,________.
A) the equilibrium price decreases, and the equilibrium quantity increases
B) the equilibrium price increases, and the equilibrium quantity decreases
C) both the equilibrium price and quantity increase
D) both the equilibrium price and quantity decrease

Question

Quizplus · Accepted Answer

When existing firms leave a perfectly competitive industry, the supply curve shifts to the left causing a decrease in the equilibrium quantity and an increase in the equilibrium price. This is because there are fewer firms producing the good, so the supply decreases which increases the price.

When Existing Firms Leave a Perfectly Competitive Industry,________