If sellers in a purely competitive market are operating at a loss, then over the long run:
A) some sellers will leave the market and the remaining firms will eventually break even.
B) some sellers will leave the market, but the remaining firms will continue indefinitely to take a loss.
C) new sellers will enter the market and replace the failing firms, and the new sellers will earn excess profit.
D) the number of sellers in the market will remain the same, but there will be more buyers so that each firm can increase its sales.

Question

Quizplus · Accepted Answer

In a purely competitive market, if sellers are operating at a loss, some will exit the market. This reduces supply, leading to higher prices for the remaining sellers, allowing them to eventually break even. This process is part of the market's self-correcting mechanism.

If Sellers in a Purely Competitive Market Are Operating at a Loss