The following figure represents the cost curves of two firms operating in different perfectly competitive industries. This economy consists only of industries 1 and 2.

-Refer to the figure above.If the market price in industry 1 is $7 and the market price in industry 2 is $3,we should expect ________ in the long run.
A) firm A to exit industry 1 and enter industry 2
B) both fims to stay in their respective industries
C) firm B to exit industry 2 and not enter industry 1
D) firm B to exit industry 2 and enter industry 1

Question

The following figure represents the cost curves of two firms operating in different perfectly competitive industries. This economy consists only of industries 1 and 2.
 
-Refer to the figure above.If the market price in industry 1 is $7 and the market price in industry 2 is $3,we should expect ________ in the long run.
A) firm A to exit industry 1 and enter industry 2 
B) both fims to stay in their respective industries 
C) firm B to exit industry 2 and not enter industry 1 
D) firm B to exit industry 2 and enter industry 1

Quizplus · Accepted Answer

Given the information, Firm B would find it more profitable to exit industry 2, where the market price is $3, and enter industry 1, where the market price is $7, to maximize its profits in the long run.

The Following Figure Represents the Cost Curves of Two Firms