One assumption of the perfectly competitive model is free entry and exit. This assumption most directly leads to the implication that:
A)firms will have to spend money on advertising.
B)positive economic profit is only possible in the short run.
C)firms will compete on the basis of better service rather than lower prices.
D)a long-run equilibrium cannot be achieved.

Question

Quizplus · Accepted Answer

Free entry means that firms can easily enter a market in response to positive economic profit. As firms enter the market, equilibrium price falls, leading economic profit to also fall.

One Assumption of the Perfectly Competitive Model Is Free Entry