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:
“Free from debt is free from care.”
—Chinese proverb.
“When women can support themselves, have entry to all the trades and professions, with a house of their own over their heads and a bank account, they will own their bodies and be dictators in the social realm.”
—Elizabeth Cady Stanton (1815–1902)