If, in a perfectly competitive industry, the market price facing a firm is above its average total cost at the output where marginal revenue equals marginal cost, then existing firms will exit the industry. new firms are attracted to the industry. market supply will remain constant. firms are breaking even.

Question

Jesus Bautista

Business

10 September, 04:44

If, in a perfectly competitive industry, the market price facing a firm is above its average total cost at the output where marginal revenue equals marginal cost, then existing firms will exit the industry. new firms are attracted to the industry. market supply will remain constant. firms are breaking even.

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Answers (1)

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Elaine Campos · Answer 1

Some existing firms will exit the industry.

Explanation:

Because the market is in loss

loss = (ATC-P) * Q

ATC>P ... given

also, the firm is in working condition because it is having the price above AVC.

Because of loss some firms in long run discourage to work and leave the market.