Entry/Exit Condition: Free
"Free entry and exit", or "no entry barriers" means simply that firms will find there are few difficulties associated with starting a new business in the industry. Factors which make entry into an industry difficult are known as "barriers to entry". Entry barriers include: difficult licensing requirements, the need to acquire patents from competitors, very large capital investments required--especially for specialized equipment or advertising, and excess (unused) capacity by competitors. We will study barriers to entry in more detail in the sections on monopoly and oligopoly.

If entry and exit are free, new firms will enter the industry rapidly if existing firms are profitable, and will exit quickly if profits disappear.

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