An increase in demand will induce entry by firms in the long run.

Name: An increase in demand will induce entry by firms in the long run.
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Question

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This is a core prediction of the theory of perfect competition. In the long run, higher demand for a good or service will attract new firms into the market, which will increase supply and drive down prices until economic profit is zero. This process is known as entry and exit.

An Increase in Demand Will Induce Entry by Firms in the Long