In the long run,perfectly competitive firms will exit the market if the price is
A) higher than average variable cost.
B) equal to average total cost.
C) less than average total cost.
D) equal to average fixed cost.
E) equal to marginal revenue.

Question

Quizplus · Accepted Answer

In the long run, firms in a perfectly competitive market will only continue to operate if they can make a profit. If the price is less than the average total cost, the firm will be making a loss and will not be able to sustain operations in the long run. Thus, firms would eventually exit the market if the price is less than their average total cost.

In the Long Run,perfectly Competitive Firms Will Exit the Market