If all firms in a perfectly competitive industry are experiencing economic losses, then:
A)some firms will exit the industry, until economic profit is positive.
B)some firms will exit the industry, until accounting profit equals zero.
C)all existing firms will stay in the industry, hoping for better times.
D)some firms will exit the industry, until economic profit equals zero.

Question

Quizplus · Accepted Answer

Firms will exit an industry if they are earning an economic loss. This will reduce supply, causing the equilibrium price to rise until the remaining firms' economic profit is zero.

If All Firms in a Perfectly Competitive Industry Are Experiencing