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Question
In perfect competition, in the long run if a new firm enters the industry the supply curve shifts to the right resulting in ___________.
In perfect competition, in the long run if a new firm enters the industry the supply curve shifts to the right resulting in ___________.
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Solution
The correct option is D fall in price
Perfect competition is a type of market where there are large number of buyers and sellers who deals in homogeneous product due to which no individual unit is able to influence the price of the product and the firms have to quote the price that prevails in the market because of the customer's knowledge about the price.In such a competition if a new firm enters the industry in the long run where the firms earn only normal profit then at the prevailing price the supply increases. As the supply increases, there will be a fall in the price of the firm.
Perfect competition is a type of market where there are large number of buyers and sellers who deals in homogeneous product due to which no individual unit is able to influence the price of the product and the firms have to quote the price that prevails in the market because of the customer's knowledge about the price.
In such a competition if a new firm enters the industry in the long run where the firms earn only normal profit then at the prevailing price the supply increases. As the supply increases, there will be a fall in the price of the firm.
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