Question
Why does entry occur?
Solution
VerifiedStep 1
1 of 2An improvement in technology might result in firms making a positive short run economic profit. In such a scenario, the existing firms have an incentive to expand their factories or to build new ones. However, new firms may start production as a result of a lucrative opportunity. This is how firms enter the market in the long run to reduce the economic profit back to zero by increasing the market supply.
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