Question

With no barriers to entry or exit and when firms in a market are operating at a loss, we can expect other firms to exit, causing the ________ curve to shift to the ________ and making the equilibrium price ________ and the equilibrium quantity ________.

Answer 1

The correct answer is (...) causing the supply curve to shift to the left and making the equilibrium price higher and the equilibrium quantity smaller

Step-by-step explanation:

The exit of firms in the market caused by a loss, means that less production is done and thus, less goods are offered in the market. This change is reflected in the supply curve as a shift to the left, meaning that a smaller quantity is offered at each price.

An increase of price is usually a consequence of the consumers willingness to pay more, since the product has become scarce, or the increase of costs in production.