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:

Present Value Of Capital

The present worth of a future amount of money or series of cash inflows based on a given rate of return.

Financial Analysis

The evaluation of businesses, projects, budgets, and other finance-related entities to determine their performance and suitability.

Decision Making

Involves the process of choosing the best option from a set of alternatives to achieve a specific goal, often based on criteria and available data.

Long-term Contracts

Agreements between parties that extend over a lengthy period, often used to secure favorable terms and ensure consistent supply or demand.