P 1 and the firm is currently producing its lossminus?minimizing quantity. In th

Question

P1

and the firm is currently producing its

lossminus?minimizing

quantity. In the long run? equilibrium,

Refer to the diagram to the right. Suppose the prevailing price is P, and the firm is currently producing its oss-minimizing quantity. In the long run equilibrium, O A. there will be fewer firms in the industry and total industry output decreases. O B. there will be more firms in the industry and total industry output increases. O C. there will be more firms in the industry and total industry output remains constant. D. there wall be fewer firms in the industry but total industry output increases MC ATC AVC MR Po Op a102 Q3 Quantity

Explanation / Answer

At price P1 the firm is facing a loss due to which in the long run there will be lesser firms and the supply of goods will decrease. It will increase the price and reduce the loss.

The answer is "A", there will be fewer firms in the industry and total output decreases.

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