Question

The industry that produces portable CD players is in long-run equilibrium. Then the demand for portable CD players decreases permanently. As a result, firms will Some firms will ____ the market, and the market supply curve will shift ______. exit leftward exit rightward enter, rightward enter, leftward

Answer 1

As a result firms will exit the market and the supply curve will shift leftward.

Step-by-step explanation:

Since the demand decreases permanently in the market for CD players, the existing companies will incur economic loss, as because they do have existing stock, which shall not be sold on the current price.

Also no new manufacturing will be done and in future the supply will shift leftward as there will be less suppliers in the market.

Basically the suppliers, when will accept the permanent decline in demand will majorly exit the market and then they will find alternative businesses, with high demand.

Accordingly the firms will exit and accordingly will less suppliers the supply will be decreased and curve will move leftward.