Entry into a market by new firms will

Question

Quizplus · Accepted Answer

Entry into a market by new firms increase the supply of the good, leading to a shift in the supply curve to the right. This increased supply will result in a decrease in the equilibrium price of the good, which may lead to a decrease in the profits of existing firms. In the long run, however, firms may adjust their production processes and costs to remain profitable. The entry of new firms will not increase the price of the good or raise the marginal cost of producing the good.

Entry into a Market by New Firms Will