Respond to this Let's say some firm was struggling and could not meet demands and the company decided to shut down but not leave the market. This company stopped producing in the short run because of the current market conditions and the loss of revenue. In the long run, the firm will be compensated for its opportunity costs. Even if this company produced nothing (a quantity of zero) the company will still have no incentive to go out of business. The firm has already paid for its fixed costs and the company will still make losses. Let's say this firm decided to completely exit the market. This was decided because its price was less than the average total cost. The company could not make up its losses and had no way to reshape its business. When a firm cannot recover its fixed costs the firm will choose to shut down only temporarily and stop all production of product to hopefully, lower costs. When a company's profits are in the negatives that is when a company will decide to completely exit the market which reduces total market supply