All else being constant, when firms leave a competitive market, then
A)market supply decreases and market price rises.
B)both market demand and market supply decrease.
C)market supply decreases and market price falls.
D)market demand decreases and market price falls.
E)market demand increases and market price rises.

Question

Quizplus · Accepted Answer

When firms leave a competitive market, the market supply decreases. This causes a decrease in the quantity supplied at every price point and shifts the supply curve leftward. As a result, the equilibrium price rises since there is less quantity supplied at every price point. The market demand curve remains unchanged. Therefore, option A is the correct choice.

All Else Being Constant, When Firms Leave a Competitive Market