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If the price is P, the firm in a perfectly competitive market is making a profit when producing the profit maximizing quantity Q1. Why would this situation lead to new entrants? Why would this increase in the number of firms competing in the market lead this firm to reduce output to Q (depicted in the right panel)? P p1 P INDUSTRY QQ¹ D S¹ FIRM Costs - Revenue MC ATC K P AR = MR p1 001 Output

If the price is P, the firm in a perfectly competitive market is making a profit when producing the profit maximizing quantity Q1. Why would this situation lead to new entrants? Why would this increase in the number of firms competing in the market lead this firm to reduce output to Q (depicted in the right panel)? P p1 P INDUSTRY QQ¹ D S¹ FIRM Costs - Revenue MC ATC K P AR = MR p1 001 Output

Microeconomics: Private and Public Choice (MindTap Course List)
Microeconomics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506893
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter10: Price-searcher Markets With Low Entry Barriers
Section: Chapter Questions
Problem 16CQ
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If the price is P, the firm in a perfectly competitive market is making a profit when producing the profit maximizing quantity Q1. Why would this situation lead to new entrants? Why would this increase in the number of firms competing in the market lead this firm to reduce output to Q (depicted in the right panel)? INDUSTRY S S¹ FIRM Costs - Revenue MC ATC K P P AR = MR ــة p1 Q Q¹ Use the editor to format your answer Output
Transcribed Image Text:If the price is P, the firm in a perfectly competitive market is making a profit when producing the profit maximizing quantity Q1. Why would this situation lead to new entrants? Why would this increase in the number of firms competing in the market lead this firm to reduce output to Q (depicted in the right panel)? INDUSTRY S S¹ FIRM Costs - Revenue MC ATC K P P AR = MR ــة p1 Q Q¹ Use the editor to format your answer Output
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