Three Firms Are Currently Producing and Selling in a Market

question 141

Multiple Choice

Three firms are currently producing and selling in a market. When one of the three firms exits the market, economists expect that the equilibrium price:

• A) be lower and the equilibrium quantity will be lower.
• B) will be higher and the equilibrium quantity will be lower.
• C) will be lower and the equilibrium quantity will be higher.
• D) will be higher and the equilibrium quantity will be higher.
• E) and the equilibrium quantity will not change.

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Definitions:

Accounts Payable

Liabilities of a business that are owed to creditors for goods and services purchased on credit.

Operating Cash Outflow

Cash expenditures during a specific period related to operational activities, including paying for goods, services, and employee wages.

Cost of Goods Sold

The direct costs attributable to the production of the goods sold by a company, including materials and labor costs.

Inventory

The entirety of goods and materials held by a company for the purpose of resale, manufacturing, or repair.