Question

According to the model presented in this chapter, what determines the
amount of entry or exit a given industry experiences?

Answer 1

The amount of entry or exit a given industry experiences is determined by the profit potential of the industry. If the industry is expected to generate high profits, then more firms will enter the industry, while if the industry is expected to generate low profits, then fewer firms will enter the industry. Additionally, if firms in the industry are currently experiencing losses, then some firms may exit the industry.