If firms in a perfectly competitive industry are earning an economic profit and new firms enter the industry, then

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When new firms enter a perfectly competitive industry, the market supply increases, causing the price to decrease. As a result, the existing firms' economic profit decreases, and the industry may even reach a point where firms are only earning normal profits. Consumer surplus may increase as a result of lower prices, but it does not necessarily decrease. There is no requirement for external benefits to consumption, and new firms may earn an economic profit, break even, or incur an economic loss depending on market conditions.

If Firms in a Perfectly Competitive Industry Are Earning an Economic