When new firms have an incentive to enter a competitive price-taker market, their entry will
A) increase the price of the product.
B) drive down profits of existing firms in the market.
C) shift the market supply curve to the left.
D) increase demand for the product.

Question

Quizplus · Accepted Answer

The entry of new firms into a competitive market increases the market supply, which typically leads to a decrease in the market price and reduces the profits of existing firms.

When New Firms Have an Incentive to Enter a Competitive