Question

When it is easy for competitors to enter the market, ________ will increase. In the _______ run, as more competitors enter the market, it ________ be possible for existing companies to earn economic profit. This means that the price charged must be equal to _______.

Answer 1

Answer:

Supply

Long

Will not

Marginal Cost

Explanation:

In a market where there are low barriers to entry, in the long run firms would enter into an industry where existing firms earn an economic profit. This would lead to an increase in supply.

When firms enter into the industry, the economic profit earned by existing firms would fall to zero and firms would set price at price equal to marginal cost