What signals the entry and exit decisions of firms in a competitive market

Question

Quizplus · Accepted Answer

Profits and losses signal the entry and exit decisions of firms in a competitive market, as firms will enter the market if profits are high and exit if they experience sustained losses. The other options, such as high or low demand for a firm's product or high/low capital costs, may be important factors for firms to consider, but they do not necessarily determine the entry and exit decisions in the same way that profits and losses do.

What Signals the Entry and Exit Decisions of Firms in a Competitive