This document provides a decision tree to help determine whether a firm should enter, exit, or remain in a market. It advises firms to enter the market if prices are above average total costs, exit if prices are below costs resulting in losses, and remain if breaking even with prices equal to costs. The tree analyzes profitability and prices to direct firms on the best decision to maximize profits and long term viability.

1. Should I Enter or Exit?
START!
Are the existing
firms making a
profit?
NO!
YES!
Is the price
of the good <
the average
Is the price of total cost?
the good > the NO!
average total
cost?
YES!
YES!
Therefore
there is a
Therefore negative
there is a profit?
positive profit?
YES! YES!
ENTER THE EXIT THE
MARKET!!! MARKET!!!

2. Should I Stay in the Market?
START!
Is your firm
making zero
economic profit?
YES!
NO!
You should So the price of
exit your firm your
if you’re good=Average
making a loss! Total Cost?
YES!
New firms will not enter
the market.
REMAIN IN
THE
MARKET!!!
Remaining firms will not
exit the market.