Suppose that the organic-produce industry is composed of a large number of small firms. In recent years, these firms have suffered economic losses, and many sellers have left the industry. Economic theory suggests that these conditions will
A)shift the demand curve outward so that price will rise to the level of production cost.
B)cause the remaining firms to collude so that they can produce more efficiently.
C)cause the market supply to decline and the price of organic produce to rise.
D)cause firms in the organic-produce industry to suffer long-run economic losses.

Question

Quizplus · Accepted Answer

When firms leave the industry, market supply declines, which leads to an increase in the price of organic produce. This is because the remaining firms have more market power and can charge higher prices due to the reduced competition. Additionally, since the industry is composed of small firms, there may be no possibility of collusion, and the remaining firms may continue to suffer long-run economic losses even with higher prices.

Suppose That the Organic-Produce Industry Is Composed of a Large