Frictions that misallocate resources among different companies can harm the economy and reduce overall welfare. A study looked at how these inefficiencies affect the number of firms in the market and the distribution of resources. The research found that when resources are directed towards less productive firms, the optimal number of companies in the market is lower than in a perfectly efficient scenario. Removing these misallocations could lead to a significant increase in overall welfare, with 30% of the potential gains coming from fixing the inefficient entry and exit of firms in the market.