Free entry is a term used by economists to describe a condition in which firms can freely enter the market for an economic good by establishing production and beginning to sell the product.
Free entry is implied by the perfect competition condition that there is an unlimited number of buyers and sellers in a market. In comparison to perfect competition, however, free entry is a condition often more applicable to real world conditions. To see this, suppose there is a good which not many people want, which is produced by only one firm. In this situation, there is not perfect competition. However, if there is free entry, the market is likely to be more efficient than if there is not. If the monopoly firm raises its prices too high, another firm could enter the market and take its customers. According to this reasoning, where there is free entry the economic damage caused by monopoly behavior may be mitigated.
Read more about Free Entry: Barriers To Entry
Famous quotes containing the words free and/or entry:
“Our Luke shall leave us, Isabel; the land
Shall not go from us, and it shall be free;
He shall possess it, free as is the wind
That passes over it.”
—William Wordsworth (1770–1850)
“All mothers need instruction, nurturing, and an understanding mentor after the birth of a baby, but in this age of fast foods, fast tracks, and fast lanes, it doesn’t always happen. While we live in a society that provides recognition for just about every life event—from baptisms to bar mitzvahs, from wedding vows to funeral rites—the entry into parenting seems to be a solo flight, with nothing and no one to mark formally the new mom’s entry into motherhood.”
—Sally Placksin (20th century)