In the long run, the entry of new firms in an industry

Question

Quizplus · Accepted Answer

The entry of new firms in an industry increases competition which can lead to lower prices for consumers. This is because new firms will enter the market with lower prices, forcing existing firms to lower their prices in order to remain competitive. This can lead to prices falling to the level of average cost or even below it, allowing consumers to benefit from lower prices. Therefore, the entry of new firms in an industry benefits consumers by forcing prices down to the level of average cost.

In the Long Run, the Entry of New Firms in an Industry