As more firms enter an industry:

Question

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When more firms enter an industry, competition increases, leading to a decrease in economic profits. This is because firms must now divide the market demand among a greater number of competitors, reducing their market share and potentially driving down their prices. Accounting profits may or may not increase, depending on how the new firms affect costs and revenues. Prices may rise in the short term if the new firms are initially unable to match the production capacity of existing firms, but in the long term they are likely to stabilize or fall as competition grows.

As More Firms Enter an Industry