Question

Six firms are currently producing and selling in a market. When two of the six firms exit the market, economists expect that the equilibrium price will ________ and the equilibrium quantity will ________.

Answer 1

Increase and Decrease are the right answers.

Step-by-step explanation:

The equilibrium price(p) will “Increase or rise” and the equilibrium quantity(Q) will “decrease or fall” because currently there are six firms in the market and these firms producing and selling in the market. If the two firms exit the market then only 4 firms will remain in the market. Therefore the supply will decrease and the supply (S) curve will shift towards leftwards. This shift in the supply curve increases the equilibrium price and decreases the equilibrium quantity.