When the Conditions in a Competitive Price-Taker Market Are Such

question 66

Multiple Choice

When the conditions in a competitive price-taker market are such that the firms are consistently unable to cover their production costs,

• A) the firms will suffer short-run economic losses that will be exactly offset by long-run economic profits.
• B) all firms will go out of business since consumers will not pay prices that enable firms to cover their production costs.
• C) some firms will exit from the industry, and market price will rise until the remaining firms can earn the normal rate of return.
• D) resource prices will increase, competition will decline, and eventually the firms in the industry will earn monopoly profit.

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