Free entry into a market will result in

Question

Quizplus · Accepted Answer

In the long run, firms in a free and competitive market will enter or exit until economic profits are zero. This is because new entrants will increase supply, bringing down prices and reducing profits, while existing firms may exit if they are earning losses. As a result, the market reaches equilibrium, and firms earn only normal profits, i.e., the opportunity cost of their resources. Therefore, free entry into a market will result in zero economic profits in the long run. Choices A, C, D, and E are incorrect because they either suggest profits will be earned or require intervention or assume interdependence among firms.

Free Entry into a Market Will Result in