When firms in a competitive market have different costs,what is likely to happen

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Quizplus · Accepted Answer

When firms in a competitive market have different costs, they will experience different levels of profit. The more efficient firms will have lower costs and therefore be able to offer lower prices or higher quality products while maintaining their profits. The less efficient firms will not be able to compete and may even exit the market. This can lead to a reduction in the number of firms in the market, but as long as there is free entry and exit, the market will still be considered competitive. In the long run, the market supply may be downward sloping as less efficient firms exit and the remaining firms increase their capacity and take advantage of economies of scale.

When Firms in a Competitive Market Have Different Costs,what Is