If firms in a perfectly competitive market are making an economic profit,new firms will enter.This entry shifts the market

Question

Quizplus · Accepted Answer

If firms in a perfectly competitive market are making an economic profit, new firms will enter the market because there are no barriers to entry. As a result, the supply curve will shift rightward, increasing the quantity supplied and reducing the market price. This process will continue until economic profits are reduced to zero. Therefore, the correct answer is D, as the new firms' entry shifts the supply curve rightward, and the market price falls.

If Firms in a Perfectly Competitive Market Are Making an Economic