When will a firm exit a market

Question

Quizplus · Accepted Answer

A firm will exit a market if it is making a negative profit or incurring losses. This is because continuing in the market would lead to further financial losses for the firm. Marginal revenue being less than marginal cost or price being below marginal cost are factors that can lead to reduced profits or losses, but they are not the sole determinant of when a firm will exit the market. The price of the product being equal to the average total cost does not factor in the overall profitability or viability of the firm in the market.

When Will a Firm Exit a Market