A firm decides to exit the industry when ........

Economics- Phase (I & II) Consumption Function

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A firm decides to exit the industry when

AC starts rising

MC starts rising

Price is less than LAC

TC starts rising

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Explanation:

A firm decides to exit the industry when Price is less than LAC. LAC at the efficient scale of production is thus the minimum average cost.Long run is that time period when a firm can change all its inputs.Thus, in the long run, there is no fixed cost; all costs are variable. That is why, in the long run, a firm can change its scale of production according to its needs.