New firms likely to enter an industry when ___

Question

Quizplus · Accepted Answer

New firms are more likely to enter an industry when the competition in the industry is likely to increase because they see an opportunity to capture a share of the market. This could happen, for example, if there is growing demand for the product, or if existing firms are not meeting the needs of customers in the market. High prices or low demand for the product would not be strong incentives for new firms to enter the market. Profitability can be a factor, but it would need to be balanced against other considerations such as the level of competition and barriers to entry.

New Firms Likely to Enter an Industry When ___