Question

In the perfect competition, if a new firm enters the industry in the long run, the supply curve __________.

• A. shifts to the left.
• B. turns upwards
• C. turns downwards
• D. shifts to the right

Answer 1

Answer: (D)

shifts to the right

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.