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Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364

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BuyFindarrow_forward

Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364
Textbook Problem

Why will losses for firms in a perfectly competitive industry tend to vanish in the long run?

To determine

The reason behind the elimination of losses for the firms in a perfectly competitive market in the long-run.

Explanation

When firms in a perfectly competitive market incur losses, it discourages firms from staying in the industry in the long run. They exit the industry. As more and more firms leave the industry the supply decreases. Given the demand, a fall in the supply puts upwards pressure on the price level...

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