When new firms have an incentive to enter a competitive market, their entry will
A)increase the price of the product.
B)drive down profits of existing firms in the market.
C)shift the market supply curve to the left.
D)increase demand for the product.

Question

Quizplus · Accepted Answer

New firms entering a competitive market will increase the supply of the product, which will drive down prices and decrease profits of existing firms in the market. This is because the market is more competitive, and consumers have more options to choose from, so firms must lower their prices to remain competitive.

When New Firms Have an Incentive to Enter a Competitive