If firms are making economic losses in a purely competitive market, some firms will exit the market, which causes the market price to raise, eliminating the losses of those firms remaining in the industry.

Question

Quizplus · Accepted Answer

When firms exit a purely competitive market due to economic losses, the supply decreases. This reduction in supply leads to an increase in market price, which can help the remaining firms to cover their costs better and potentially eliminate their losses.

If Firms Are Making Economic Losses in a Purely Competitive