Economic theory would suggest that the profitability of an industry would be

Question

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Economic theory suggests that as the number of firms in an industry increases, the competition among those firms also increases, reducing the profitability of each firm. This is because each firm will have to lower their prices in order to compete for customers, resulting in reduced profits. Conversely, as the number of firms in an industry decreases, the competition among those firms also decreases and the remaining firms may enjoy higher profitability. Therefore, the profitability of an industry is inversely related to the number of firms competing in the industry.

Economic Theory Would Suggest That the Profitability of an Industry