If new firms enter a perfectly competitive industry,the market supply

Question

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When new firms enter a perfectly competitive industry, the number of firms in the industry increases, which leads to an increase in the market supply. This is because each new firm brings additional output into the market. As a result, the market supply curve shifts to the right, which causes a decrease in market price. Therefore, option D is the correct answer. Options A and E are incorrect because the entry of new firms changes the market supply. Option B is incorrect because the price elasticity of supply is dependent on the responsiveness of quantity supplied to changes in price, which is not impacted by the entry of new firms. Option C is also incorrect because the entry of new firms does not make the market supply more price inelastic.

If New Firms Enter a Perfectly Competitive Industry,the Market Supply