A competitive market is earning unusually high profits. Entry is easy and several new firms are preparing to launch. What is the most likely longer chain of effects?
More entry increases rivalry, putting downward pressure on prices and profit
More entry reduces consumer choice, allowing existing firms to raise prices
New firms remove supply from the market, protecting unusual profit
Unusually high profit makes entry less attractive and rivalry disappears
149 exam-style questions on AQA GCSE Economics 1.5 Competitive and concentrated markets, covering 1.5.1a The range of market structures, 1.5.1b Distinguishing between market structures, 1.5.2a Characteristics of a competitive market, 1.5.2b How producers operate in competitive markets, 1.5.2c The economic impact of competition, 1.5.3a Characteristics of a non-competitive market, 1.5.3b How producers operate in non-competitive markets, 1.5.3c Monopoly and oligopoly, 1.5.4a The labour market and wage determination, and 1.5.4b Gross and net pay. Each one has a worked solution and a mark scheme showing where the marks go.