In the long run, if a perfectly competitive firm cannot cover its costs, the profit-maximizing firm will
A) continue to produce as long as total revenue exceeds total fixed cost.
B) continue to produce as long as total revenue exceeds total variable cost.
C) continue to produce to maximize its opportunity costs.
D) seek more rewarding opportunities in some other industry.
E) increase output and lower price.

Question

Quizplus · Accepted Answer

In the long run, if a perfectly competitive firm cannot cover its costs, it cannot sustain its operations indefinitely by incurring losses. Therefore, the profit-maximizing strategy would be to exit the industry and seek more rewarding opportunities elsewhere, where it can cover its costs and potentially earn profits.

In the Long Run, If a Perfectly Competitive Firm Cannot