Suppose firms in a perfectly competitive market are earning an economic profit. As new firms enter, the price _______ and the economic profit of each existing firm _______.

Question

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In a perfectly competitive market, if firms are earning an economic profit, new firms will be attracted to the market. This increases supply, leading to a decrease in price. As the price falls, the economic profit of each existing firm decreases.

Suppose Firms in a Perfectly Competitive Market Are Earning an Economic