Under what price condition will firms leave a market in the long run ?
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Answer: C. average total cost
Explanation
Average total cost represents the total cost per unit of output produced by the firm. In the long run, competitive firms require prices to cover all production costs to remain viable. Falling below average total cost generates persistent economic losses, prompting firms to exit the market. Perfect competition ensures zero economic profit in the long run when price equals minimum average total cost. Firms shut down immediately in the short run if price falls below average variable cost levels. Long-run exit decisions depend on covering all fixed and variable expenses reflected in total costs.
Microeconomic models use exit conditions to explain industry supply adjustments during market downturns. Failing businesses liquidate assets and leave unprofitable sectors to seek higher returns elsewhere. Market equilibrium is restored when departing firms reduce total supply, pushing prices back up to cost. Option A represents incremental revenue per unit, which does not determine long-run industry exit directly. Option B represents incremental production cost rather than the full unit cost required for market survival. Option D refers to total revenue divided by quantity, which equals price in competitive markets.
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