Consider a competitive market where the current price for a product is $50 per unit. A new production method is discovered that allows any firm to produce the good at an average cost of $40 per unit. True or False: Despite this cost-saving discovery, there is no incentive for new firms to enter this market.
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Consider a competitive market where the current price for a product is $50 per unit. A new production method is discovered that allows any firm to produce the good at an average cost of $40 per unit. True or False: Despite this cost-saving discovery, there is no incentive for new firms to enter this market.
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If new companies can manufacture a product at an average cost that is lower than the current market price, there is a strong profit incentive for them to enter the market. This influx of new producers increases the total market supply, which will ultimately cause the market price to ____.
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