Market Exit of A Firm Assignment Help
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.
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Explanation:
When the price of the products of the firm is less than the average total cost of production, then the firm should leave the market. Because the revenue generated from sales of the product is less than the amount invested in making the products.
Example:
Uslu et al. (2016) have courteously explained the reasons for market exit of the forest products industry in Alabama. The firm was the second largest manufacturing sector of Alabama and was under recession from the mid-90s. The analysis of the firm economic data from 1996-2012 indicated the prime reason for the recession was the average variable cost. The analysis in the article shown that,
- Increase in cost of raw material
- Labor cost was not the determinant of recession and market exit
- Demand of the forest products were almost similar during the period of study
It explains the reason of market exit of forest product industry and justifies the explanation.
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