When new firms have an incentive to enter a competitive market, their entry will:

Question

Quizplus · Accepted Answer

When new firms enter a competitive market, they increase the supply of goods available, leading to a decrease in market price. This decrease in price will lower the profits of existing firms in the market as they will have to lower their prices to remain competitive. The quantity of goods supplied in the market may increase or stay the same depending on the specific circumstances of the market, but it will not be unchanged. Thus, option B is the best choice.

When New Firms Have an Incentive to Enter a Competitive