Question

If a perfectly competitive firm is experiencing a sustained pattern of losses in the long run, it will likely _____________.

Answer 1

If a perfectly competitive firm is experiencing a sustained pattern of losses in the long run, it will likely to reduce production or shut down.

How losses affect the short run and long run competitive firm?

• The line separating the short run and the long run cannot be precisely determined by a stopwatch or even a calendar. Depending on the specific industry, it varies.
• In the near term, businesses are unable to change how they use fixed inputs, but over the long run, they are able to change every aspect of production.
• Profits are a red cape that propels businesses forward in a cutthroat market.
• Depending on whether its sales are sufficient to cover its variable costs, a company that experiences short-term losses will either continue to operate inefficiently or just close its doors.
• Over time, however, companies that are losing money will significantly reduce, if not completely stop, their manufacturing.
• Exit is the process of gradually reducing production in response to a consistent pattern of losses.

Learn more about the perfect competition with the help of the given link:

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