When firms already in a competitive market are profitable, an incentive exists for:

Question

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When firms in a competitive market are profitable, new firms are most likely to enter the market in order to capture some of the profits. The incentive is for new firms to enter and establish themselves in the market while existing firms must either stay competitive or lose market share to newcomers. It is unlikely that existing firms will increase production or raise prices as they are already profitable, and seeking government subsidies is not necessarily the optimal choice for new firms to enter a competitive market.

When Firms Already in a Competitive Market Are Profitable, an Incentive