Question

Unit 7 Group DB: Exiting a Market

Under what conditions will a firm exit a market? Explain. Find an article that addresses the announcement that a firm is leaving a market. Explain the conditions for the departure within the context of the article.

Answer 1

The firm can decide to exit the market when the revenue generated from production is less than the variable costs involved in the production.

The firm will shut down the business and exit the market when

‘MARGINAL REVENUE’ < 'AVERAGE VARIABLE COST' at ‘profit-maximizing output’.

If ‘PRICE’ < ‘AVERAGE VARIABLE COST.

To continue operations it should have operated at:

‘MARGINAL REVENUE’ = MARGINAL COSTS'.

In the article of any firm leaving the market there is a introduction to the history of the firm and then the details of closing the firm and losses that are incurred by the firm. It can also include the important persons associated with the company and problems faced by the company to continue its operations in the market. At last, company or firm assures the consumers to have a opportunity to serve them.