question archive New firms will enter an industry if there is an increase in the price of a substitute good assuming an initial long run competitive equilibrium with no sunk costs of production
New firms will enter an industry if there is an increase in the price of a substitute good assuming an initial long run competitive equilibrium with no sunk costs of production
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New firms will enter an industry if there is an increase in the price of a substitute good assuming an initial long run competitive equilibrium with no sunk costs of production. T/F. Explain.
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New firms will prefer to enter an industry if there is an increase in the price of a substitute good assuming an initial long run competitive equilibrium with no sunk costs of production to avoid losses.
Step-by-step explanation
Firms enter the industry, causing the supply curve to shifts to the right when the price falls and the profits fall.
As the firms continue to enter the industry, economic profits falls to zero.
Hence this leads some firms in an industry to leave.
The supply curve shifts to the left, increasing price and reducing losses.
This will cause new firms to prefer to enter an industry if there is an increase in the price of a substitute good assuming an initial long run competitive equilibrium with no sunk costs of production to avoid losses.
