Implication of freedom of entry and exit to firms
Describe the implication of freedom of entry and exit to the firms beneath perfect competition.
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The firms enter the organization whenever they find the existing firms are earning super normal profits. Their entry increases output of the industry, brings down the market price and therefore reduce gains. The entry continues till gains are decresed to normal (or zero). The firms begin leaving the industry whenever they are facing losses. This decreses output of the industry, increases market price and decrease losses. The exit continues till losses are wiped out.
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Purely-competitive markets are NOT characterized through: (i) substantial barriers to entry and exit. (ii) many small potential buyers. (iii) many small potential sellers. (iv) homogeneous products. (v) zero long-run economic profits. Discover Q & A Leading Solution Library Avail More Than 1412708 Solved problems, classrooms assignments, textbook's solutions, for quick Downloads No hassle, Instant Access Start Discovering 18,76,764 1933114 Asked 3,689 Active Tutors 1412708 Questions Answered Start Excelling in your courses, Ask an Expert and get answers for your homework and assignments!! Submit Assignment
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