In the long run, a firm will exit a competitive industry if
A)total revenue exceeds total cost.
B)the price exceeds average total cost.
C)average total cost exceeds the price.
D)Both a and b are correct.

Question

Quizplus · Accepted Answer

In the long run, a firm will exit a competitive industry if the price is less than or equal to the average total cost. If the price is below the average total cost, the firm will not be able to cover its costs and make a profit. Therefore, the best choice is C, where average total cost exceeds the price. Options A and B do not take into account the concept of profitability or the ability to cover costs.

In the Long Run, a Firm Will Exit a Competitive