In a competitive market that is characterized by free entry and exit,what will be the result

Question

Quizplus · Accepted Answer

In a competitive market with free entry and exit, firms will enter the market when they see an opportunity to make profits and exit when they incur losses. This leads to an eventual long-run equilibrium where all firms operate at their efficient scale, which is the quantity of output where average total cost is minimized. Therefore, choice B is the correct answer. Choice A is incorrect because firms may not be able to operate at efficient scale in the short run due to limitations such as capacity constraints. Choice C is incorrect because in a competitive market, firms will charge the same price for the same product. Choice D is incorrect because, in a competitive market, the number of firms is likely to grow over time, rather than decrease.

In a Competitive Market That Is Characterized by Free Entry