Firms exit the market

Definition

When firms exit the market, it means they permanently stop producing and selling goods or services in that particular industry. This can happen due to various reasons such as declining profitability or inability to compete effectively.

Related terms

Shutdown point: The minimum point on a firm's average variable cost curve where it can temporarily halt production in the short run without incurring additional losses.

Economies of scale: Cost advantages that larger firms have over smaller ones due to factors like bulk purchasing, specialization, or technology.

Industry consolidation: When multiple small firms merge or are acquired by larger companies, reducing competition within an industry.