Gary's Gym is earning a positive economic profit due to its price exceeding average total cost. How would the entry of eFitness into the market, an oligopoly competitor, primarily affect Gary's Gym's pricing strategy and economic profit classification?

When eFitness enters the market, it will create more competition for Gary's Gym. This means that Gary's Gym may have to lower its prices to attract and keep customers, especially if eFitness offers similar or better services. As a result, the average total cost for Gary's Gym may increase or its economic profit may decrease, moving it closer to zero or even into a loss if prices drop significantly. For example, if Gary's Gym is currently charging $50 and making a profit, but has to lower its price to $40 to compete, its profit margins will shrink. In the long run, if economic profit decreases, Gary's Gym might need to find ways to improve efficiency or enhance its services to maintain profitability.