Econ question? ?
What is an “Exit” and a “Shutdown” for a firm under Perfect Competition. Describe the difference between the two concepts.
This is what I have so far, any input is appreciated! I just don't know the difference between the two concepts
An exit for a firm under perfect competition can be described as a firm that regularly cannot make money, meaning that the business has failed. When a firm is experiencing losses, it has to decide whether or not they should keep producing or not.
- JuanBLv 71 month agoFavorite Answer
Shutdown should really be described as "temporary shutdown" if it is an assumption. Add temporary in your head and you get the idea. eg: restaurants shut down with COVID and laid employees off. Still own the business though and hope to open when things get better.
Exit is definitely completely no longer in the business. examples. Bankruptcy, or use to own a restaurant, now own a hotel, or owned a restaurant and now work for somebody else.
- 1 month ago
It is funny to me how capitalist econ schools still pretend like perfect competition is a thing or even relevant to modern capitalism.
- OiyLv 61 month ago
The firm will shut down in the short term if the variable cost cannot cover the fixed cost. But the firm will exit in the long run if the long run average cost cannot reach the lowest point of the industry. The higher cost firm cannot compete, and must exit the market.