The long-run exit rule is to exit the industry if:

Question

Quizplus · Accepted Answer

The long-run exit rule is to exit the industry if price (P) is less than the average total cost (ATC) because the company is not able to cover its total costs and would be better off investing its resources elsewhere. Therefore, option D is correct. Options A and C do not provide a clear indication of whether the company should exit the industry or continue to operate. Option B is incorrect because a price greater than the average variable cost (AVC) means that the company is covering its variable costs and could continue to operate in the short run, even if it is not covering its total costs.

The Long-Run Exit Rule Is to Exit the Industry If