In a competitive market with free entry and exit,the process of entry and exit ends when,for the typical firm in the market,

Question

Quizplus · Accepted Answer

In a competitive market with free entry and exit, new firms will enter the market as long as they can earn economic profits. This will increase the supply in the market, decrease the price, and lower the profits of existing firms. The process of entry and exit will continue until price equals long-run average total cost, which is equivalent to the condition where marginal revenue equals long-run marginal cost for the typical firm. Therefore, choice A is the correct answer.

In a Competitive Market with Free Entry and Exit,the Process