Potential for Further Market Entry and Price Reduction
If some existing firms or potential new entrants can produce at an average cost lower than the current market price, there is an incentive for market supply to increase further. This increased supply, driven by the pursuit of profit, will in turn cause the market price to fall.
0
1
Tags
Social Science
Empirical Science
Science
Economy
CORE Econ
Economics
Introduction to Microeconomics Course
The Economy 2.0 Microeconomics @ CORE Econ
Ch.8 Supply and demand: Markets with many buyers and sellers - The Economy 2.0 Microeconomics @ CORE Econ
Related
An Increase in the Supply of Bread Through Investment in New Capacity at the Market Level (Figure 8.17)
Long-Run Equilibrium in a Competitive Market
Potential for Further Market Entry and Price Reduction
Short-Run Losses and Long-Run Market Exit
Short-Run Rents as a Driver for Long-Run Market Entry and Capacity Expansion
A Bakery's Firm-Level Decision to Invest in More Capacity (Figure 8.16)
Costs of Entry
Market-Wide Expansion and Entry's Effect on Supply and Price
Imagine a city's market for handcrafted wooden chairs, which is currently in a short-run equilibrium where numerous small workshops are earning significant economic profits. Assuming it is relatively easy and inexpensive for new artisans to set up a workshop, which of the following describes the most likely chain of events in the long run?
Consider a competitive market where, due to a sudden increase in consumer demand, firms are currently earning profits well above their normal rate of return. Arrange the following events in the logical order that describes how this market will adjust over the long term.
Market Adjustment in the Scooter Rental Industry
Long-Run Adjustment to Market Losses
Long-Run Market Adjustments to Profits and Losses
In a market where many small firms are producing an identical product and are currently earning profits significantly above the normal rate of return, the long-run adjustment process will ultimately cause the market price to increase.
Match each short-run market condition with the primary long-run adjustment that is expected to occur as a result.
In a competitive market, the existence of short-run economic profits for incumbent firms serves as a key signal. In the long run, this signal will attract new entrants and encourage existing firms to expand, leading to an increase in the overall market ____.
Strategic Expansion Decision for a Local Bakery
An entrepreneur observes that the few existing gourmet cupcake shops in a city are consistently busy and are earning high profits. The entrepreneur is now considering opening a new cupcake shop to capitalize on this opportunity. From the perspective of long-run market dynamics, what is the most significant economic risk the entrepreneur should consider before entering this market?
Learn After
A Firm's Decision to Reduce Costs or Exit the Market
Market Dynamics in the Coffee Shop Industry
In a city's competitive market for baked bread, the prevailing market price is $5 per loaf. Several new bakeries discover a new, more efficient oven technology that allows them to produce a comparable loaf of bread at an average cost of $3. Assuming no significant barriers to entry, what is the most likely long-term outcome in this market?
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.
Market Response to Cost Innovation
Imagine a competitive market where a technological innovation allows new companies to produce a product at a significantly lower average cost than the current market price. Arrange the following events in the logical sequence that would typically occur.
Market Adjustment to Cost Discrepancies
Match each market scenario with the most likely resulting change in market supply and price.
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 ____.
Market Entry in the Autonomous Ride-Sharing Sector
In a competitive market for tablet computers, the current market price is $300 per unit. A company develops a new manufacturing process that allows it to produce a comparable tablet at an average cost of $250. The company's management team is aware that this new process is not patentable and can be easily replicated by other potential new firms. The CEO states, 'We must enter this market aggressively to take advantage of the $50 profit margin.' Which of the following statements provides the most accurate economic evaluation of the CEO's strategy?