Existing nightclubs find that business falls off some as new clubs open. Entry will continue until profits are again zero. We show this as a shift back in demand to D2 and D2, price falls to MR2 and quantity for existing clubs to Q2.

    Due to the reduction in fixed costs the new equilibrium differs from the old in that there are more nightclubs and prices are lower. Overall more people go to nightclubs now that prices are lower and there are more clubs, but fewer people attend any specific club.

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