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free entry


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The absence of any obstacle to new entrants to a market. The consequence of free entry is that firms will enter a market until it is not possible for another firm to enter and earn at least normal profit. The assumption of free entry is often used as justification for concluding that firms act competitively but the two concepts are logically distinct: free entry also occurs in monopolistic competition. See also barriers to entry.

Subjects: Economics.


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