their “business venture” must eventually end.

In the model of perfectly competitive firms, those that consistently cannot make money will “exit,” which is a nice,

bloodless word for a more painful process. When a business fails, after all, workers lose their jobs, investors lose

their money, and owners and managers can lose their dreams. Many businesses fail. The U.S. Small Business

Administration indicates that in 2011, 534,907 new firms "entered," and 575,691 firms failed.

Sometimes a business fails because of poor management or workers who are not very productive, or because of

tough domestic or foreign competition. Businesses also fail from a variety of causes. For example, conditions of

demand and supply in the market may shift in an unexpected way, so that the prices that a business charges for

outputs fall or the prices for inputs rise. With millions of businesses in the U.S. economy, even a small fraction of
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