When New Firms Have an Incentive to Enter a Competitive

question 116

Multiple Choice

When new firms have an incentive to enter a competitive price-taker 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.

---

Definitions:

Units

refers to a single, quantified piece of something that is used for measurement or as a standard for exchange.

Average Variable Costs

The total variable costs (e.g., labor, materials) divided by the quantity of output produced, showing the variable cost per unit of output.

Workers

Individuals engaged in physical or mental labor to produce goods or provide services in exchange for wages.

Units

Basic quantities of measurement or items in inventory or production.