Question

True or False: and can you tell me why.

In a competitive market where the price is below the average variable cost, new firms enter the industry in the long run and increase the equilibrium supply

Answer 1

False,

if the market price is below the average variable cost that means the current firm producing the goods are not able to take out the variable cost as well I.e. the production cost of the firm, in that case they will stop production and shut down, in the long run more and more firms in the market will quit the industry and that will increase the price and supply of the goods as at a higher price the output will increase.