When firms leave a perfectly competitive market, then, other things remaining un
ID: 1223115 • Letter: W
Question
When firms leave a perfectly competitive market, then, other things remaining unchanged:
the market demand will decrease but the market price will rise.
the market supply will decrease but the market price will rise.
both the market supply and the market price will fall.
both the market demand and the market supply will decrease.
both the market demand and the price will increase.
a.the market demand will decrease but the market price will rise.
b.the market supply will decrease but the market price will rise.
c.both the market supply and the market price will fall.
d.both the market demand and the market supply will decrease.
e.both the market demand and the price will increase.
Explanation / Answer
option E is correct.
when a firm exit from a perfectly competitive market, its contribution of supply comes down. so the demand in the same proportionate will be increase, and here the shortage of supply leads to increase in its price in the market.
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