The entry of firms into a market
A)Increases the equilibrium price.
B)Reduces the profits of existing firms in the market.
C)Shifts the market supply curve to the left.
D)Shifts the market demand curve to the left.

Question

Quizplus · Accepted Answer

Entry of firms increases competition in the market, leading to a decrease in demand and thus reducing the profits of existing firms. It does not necessarily affect the equilibrium price or shift the market supply/demand curve.

The Entry of Firms into a Market