Suppose that a monopolistically competitive firm is currently producing at the point where marginal revenue equals marginal cost and is not covering the variable cost of producing the last unit. In this situation, economic theory would predict that the firm will:
a. raise prices in order to lessen the amount of the loss.
b. collude with other producers.
c. exit the industry.
d. be able to switch to a point of profitability by producing where price equals marginal cost.
Ans: c. exit the industry.
Economics
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