Assume that all firms in this industry have identical cost curves, and that the market is perfectly competitive. If the market supply curve is given by S3, then in the long run firms will:
A)exit the market, leading the market supply curve to shift back to S2.
B)exit the market, leading the market supply curve to shift back to S1.
C)enter the market, leading the market supply curve to shift back to S2.
D)neither enter nor exit the market, so the market supply curve will remain at S3.

Question

Assume that all firms in this industry have identical cost curves, and that the market is perfectly competitive.  If the market supply curve is given by S3, then in the long run firms will:
A)exit the market, leading the market supply curve to shift back to S2. 
B)exit the market, leading the market supply curve to shift back to S1. 
C)enter the market, leading the market supply curve to shift back to S2. 
D)neither enter nor exit the market, so the market supply curve will remain at S3.

Quizplus · Accepted Answer

The Answer of Assume that all firms in this industry have identical cost curves, and that the market is perfectly competitive.  If the market supply curve is given by S3, then in the long run firms will:
A)exit the market, leading the market supply curve to shift back to S2. 
B)exit the market, leading the market supply curve to shift back to S1. 
C)enter the market, leading the market supply curve to shift back to S2. 
D)neither enter nor exit the market, so the market supply curve will remain at S3.

Assume That All Firms in This Industry Have Identical Cost