Each of the statements shown is characteristic of a phase in the development of a competitive market industry. Please classify each statement as a cause of firms exiting the market, the number of firms in the market remaining stable, or firms entering the market. Firms exit the market a. Price is greater than average cost. Number of firms remains stable Answer Bank b. Price is less than average cost. d. Firms earn both economic profit and accounting profit. Firms enter the market c. No firms earn economic profit. e. Firms earn an economic loss.

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Equilibrium Price and Quantity

Equilibrium refers to a state of balance that comes about because there is equality in all forces.