What role does new firm entry play in a competitive market? (as this relates to price...

What role does new firm entry play in a competitive market? (as this relates to price and competition)

Expert Solution

In competitive market , profits are important points for deciding business growth.if there is profit in a business in the short run then it has incentive to expand existing factories.new firms starts to make production.when new firms entre the industries to response to increased industry profits .it is called entry.

Entry of new firms causes the market supply curve to shift to the right.when these curve shifited to the right then market price will become fall .these will leads to reduce economic profit.as long as there are profit in the market.entry will continue to shift supply to the right.

Rahul Sunny answered 2 years ago

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