Final answer:
The statement is false; in the Cournot model, each firm's output may decrease, but overall market output increases and the price may decrease as more firms enter the market, leading to zero economic profits in the long run.
Step-by-step explanation:
Assuming Cournot behavior, which is a model of competition among firms that decide on the quantity to produce independently and simultaneously, the statement that the market output, the price of output and each firm's output decrease as the number of firms in a market increase is actually false. In the Cournot model, as more firms enter the market, each firm's output may indeed decrease since the market has to be shared among more competitors. However, the total market output increases because there are more firms contributing to the market supply. The price of the product may go down due to increased competition, which leads to a more competitive market price. These dynamics ultimately drive the market towards a point where firms earn zero economic profits in the long run, as new entrants erode the market power and profits of the established firms by increasing overall supply and reducing prices.