When economic profits are negative in a perfectly competitive industry,

Question

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In a perfectly competitive industry, when economic profits are negative, it means that firms are incurring losses. This will cause some firms to exit the market, reducing the overall supply. As a result, we would expect the market supply curve to shift to the left. This decreases the quantity supplied and increased the market price, which can eventually restore the industry to the long-run equilibrium.

When Economic Profits Are Negative in a Perfectly Competitive Industry