When existing firms in a competitive market are profitable, an incentive exists for
A)new firms to seek government subsidies that would allow them to enter the market.
B)new firms to enter the market, even without government subsidies.
C)existing firms to raise prices.
D)existing firms to increase production.

Question

Quizplus · Accepted Answer

The profitability of existing firms indicates that there is demand in the market that is not being met, creating an opportunity for new firms to enter and compete. This incentive exists regardless of government subsidies, as new firms can still enter and offer competitive prices and products.

When Existing Firms in a Competitive Market Are Profitable, an Incentive