When firms have an incentive to exit a competitive price-taker market, their exit will
A) lower market price.
B) necessarily raise the costs of firms that remain in the market.
C) raise profits for firms that remain in the market.
D) reduce demand for the product.

Question

Quizplus · Accepted Answer

When firms exit a competitive market, the supply decreases, which can lead to higher prices and potentially higher profits for the remaining firms.

When Firms Have an Incentive to Exit a Competitive Price-Taker