Which of the following does NOT occur when a new entrant enters a competitive marketplace?

• A. Equilibrium price tends to decrease
• B. Existing firms experience increased competition
• C. Barriers to entry become higher
• D. Market supply increases

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the concept of a competitive marketplace, where many firms can freely enter and exit the market without significant restrictions.
2. Step 2: Recognize that when a new entrant enters the market, the total market supply increases because there are more producers offering the good or service.
3. Step 3: Know that an increase in market supply, holding demand constant, typically causes the equilibrium price to decrease as more goods are available.
4. Step 4: Realize that existing firms face increased competition because the new entrant adds to the number of sellers, which can reduce market share and profits for incumbents.
5. Step 5: Identify that barriers to entry are factors that make it difficult for new firms to enter the market; however, the entry of a new firm does not cause these barriers to become higher—in fact, barriers are usually a pre-existing condition, not a consequence of entry.