As long as economic losses are being earned in an industry, firms will ________ the industry and the supply curve will shift to the ________.Group of answer choicesenter; rightenter; leftexit; leftexit; right
Question
As long as economic losses are being earned in an industry, firms will ________ the industry and the supply curve will shift to the ________.Group of answer choicesenter; rightenter; leftexit; leftexit; right
Solution
As long as economic losses are being earned in an industry, firms will exit the industry and the supply curve will shift to the left.
Here's why:
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If firms in an industry are experiencing economic losses, it means that the revenue they are generating from their operations is less than the costs they are incurring.
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In such a situation, it is not profitable for firms to continue operating in the industry. Therefore, they will start exiting the industry.
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As firms exit the industry, the overall supply of the product or service that the industry provides will decrease.
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In terms of supply and demand, a decrease in supply is represented by a shift to the left of the supply curve.
So, the correct answer is "exit; left".
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