The exit of existing firms from a competitive market will
A)increase market supply and increase market price.
B)increase market supply and decrease market price.
C)decrease market supply and increase market price.
D)decrease market supply and decrease market price.

Question

Quizplus · Accepted Answer

When existing firms exit from a competitive market, the market supply decreases as there are now fewer firms producing goods or services. With a decrease in supply, the market price tends to increase as the remaining firms compete for the same number of consumers. Therefore, the best choice is C - decrease market supply and increase market price.

The Exit of Existing Firms from a Competitive Market Will