how-does-the-entry-of-new-firms-eliminate-short-run-profits-and-restore-long-run

Question

How does the entry of new firms eliminate short run profits and restore long run equilibrium in a competitive market?

Accepted Answer

New firms increase supply, reducing prices until profits are zero.

Answer

Existing firms increase production, maintaining high profits.

Answer

Existing firms exit the market, reducing competition.

Answer

New firms decrease supply, increasing prices until profits are zero.