Which is an important aspect of the perfectly competitive market that leads to long run equilibrium?
A) perfect information
B) freedom of entry and exit
C) price taking behavior
D) homogeneous products

Question

Quizplus · Accepted Answer

Freedom of entry and exit allows for new firms to enter the market when existing firms are making profits, increasing supply and driving down prices. This leads to a decrease in profits for existing firms and a decrease in supply for new firms until the market reaches long run equilibrium with normal profits. Perfect information, price taking behavior, and homogeneous products are also important aspects of a perfectly competitive market, but they alone do not lead to long run equilibrium.

Which Is an Important Aspect of the Perfectly Competitive Market