As the firm's fixed costs increase
A)The number of firms will rise in the long run
B)The number of firms will fall in the long run
C)The number of firms will stay the same in the long run
D)It is impossible to tell from the information given

Question

Quizplus · Accepted Answer

As the fixed costs of firms increase, it becomes more expensive for new firms to enter the market. This makes it less likely for new firms to enter and compete with existing firms in the long run, leading to a decrease in the number of firms.

As the Firm's Fixed Costs Increase