When there is free entry and exit in a market, in the long run, price will:
A)keep rising.
B)keep falling.
C)never change.
D)equal average cost.

Question

Quizplus · Accepted Answer

In the long run, when there is free entry and exit in a market, firms will enter if prices exceed average cost and exit if prices are below average cost. This will drive prices towards equilibrium with average cost, resulting in D) equal average cost in the long run.

When There Is Free Entry and Exit in a Market