Assume the firms in a perfectly competitive market are initially incurring economic losses.An increase in supply would cause existing firms' economic losses to decrease.

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Quizplus · Accepted Answer

An increase in supply would actually cause existing firms' economic losses to increase, as the market price would decrease due to the excess supply. This would lead to a larger gap between the market price and the firms' average total cost, resulting in larger economic losses.

Assume the Firms in a Perfectly Competitive Market Are Initially