What does increased competition generally do to prices in an industry?

Increased competition in an industry typically leads to a decrease in prices. This occurs because, as more firms enter the market, they compete for consumers by lowering prices to attract more buyers. When multiple suppliers are offering similar products or services, they often seek to differentiate themselves through pricing strategies. In a competitive market, if one company lowers its prices, others may follow suit to maintain their market share. This downward pressure on prices can benefit consumers by providing them with more choices and lower costs.

Additionally, competition encourages firms to become more efficient in their production processes to keep costs down, further contributing to lower prices. Overall, the dynamics of supply and demand, coupled with competitive behaviors, tend to drive prices lower as firms respond to the presence of rivals in the market.