Suppose thatsome firms in a perfectly competitive industry are incurring negative economic profits. In the long run, the

a industry supply curve will not shift
b. industry supply curve will shift to the left

c. number of firms in the industry will not change

d. number of firms in the industry will increase

The correct answer is d. The number of firms in the industry will increase.

In a perfectly competitive industry, negative economic profits indicate that firms are not covering their opportunity costs and are earning below-normal returns. In the long run, firms will exit the industry as a result of these negative profits. As firms exit, the industry supply curve will shift to the left, reducing the overall quantity supplied in the market. This reduction in supply will lead to an increase in prices.

Simultaneously, the exit of firms will create a more favorable environment for the remaining firms. The increased prices and reduced competition will eventually attract new firms to enter the industry. As a result, the number of firms in the industry will increase in the long run until economic profits are driven back down to zero.

To determine the answer to this question, we need to understand how the long run adjustments work in a perfectly competitive industry.

In a perfectly competitive industry, firms are small and have no market power. They take the market price as given and can freely enter or exit the industry. In the short run, firms may earn positive or negative economic profits due to various factors like changes in demand or input costs. However, in the long run, firms adjust their operations to reach a state of equilibrium.

Now let's analyze the options given:

a) If firms incurring negative economic profits (losses) in the short run, but continue to produce in the long run, it suggests that they believe the situation is temporary and expect to recover their losses in the future. Therefore, the industry supply curve will not shift as firms are staying in the market.

b) If firms incurring negative economic profits (losses) decide to exit the industry in the long run, the industry supply curve will shift to the left. This is because the overall supply in the market will decrease when those firms exit, resulting in a decrease in the quantity supplied and a potential increase in the market price.

c) The number of firms in the industry will not change only if firms incurring negative economic profits decide to continue operating in the long run. However, this is less likely as firms will be motivated to exit the industry to avoid further losses. Therefore, the number of firms is more likely to change rather than remaining constant.

d) The correct answer is "d. The number of firms in the industry will increase." If firms are incurring negative economic profits, some firms may choose to exit the industry. This decreases the overall supply in the market. As a result, existing firms may experience a decrease in competition, potentially allowing them to earn positive economic profits. This creates an incentive for new firms to enter the market. Thus, in the long run, more firms are likely to enter the industry, leading to an increase in the number of firms.

In summary, the correct answer is "d. The number of firms in the industry will increase".