In the long run,the entry of new firms in a competitive industry _____

Question

Quizplus · Accepted Answer

The entry of new firms in a competitive industry increases the supply of the product and reduces the market price. This reduces the economic profits of existing firms and prevents new firms from entering the industry. In the long run, the market reaches a new equilibrium where firms earn zero economic profit. Therefore, the entry of new firms eliminates economic profits.

In the Long Run,the Entry of New Firms in a Competitive