The entry of new firms into a market,all other things equal,will have what effect on equilibrium price and quantity?
A)Price will increase,quantity will decrease
B)Price will increase,quantity will increase
C)Price will decrease,quantity will decrease
D)Price will decrease,quantity will increase
E)The new equilibrium price and quantity can not be determined

Question

Quizplus · Accepted Answer

The entry of new firms into a market will increase competition, which will result in a decrease in price and an increase in quantity demanded. This is because the new firms will increase the supply of the product, which will push the equilibrium price down, and the increase in competition will result in more consumers purchasing the product, thus increasing the equilibrium quantity.

The Entry of New Firms into a Market,all Other Things