In the long run, firms will exit industries where price is:
A) greater than average cost.
B) equal to average cost.
C) less than average cost.
D) positive.

Question

Quizplus · Accepted Answer

When the price is less than average cost, the firms will not be able to cover their costs in the long run and will have to exit the industry. This is because they will be making losses and will not be able to sustain their operations. However, if the price is greater than or equal to average cost, the firms will be able to cover their costs and stay in the industry.

In the Long Run, Firms Will Exit Industries Where Price