If competitive industry Y is incurring substantial losses, we can expect that output will:
A)expand, product price will rise, and losses will tend to disappear.
B)contract, product price will fall, and losses will increase.
C)contract, product price will rise, and losses will tend to disappear.
D)expand, product price will fall, and losses will tend to disappear.

Question

Quizplus · Accepted Answer

In a competitive industry, if firms are incurring losses, some firms will exit the market, leading to a contraction in output. This reduction in supply will cause the product price to rise, which will help remaining firms reduce their losses or return to profitability.

If Competitive Industry Y Is Incurring Substantial Losses, We Can