With free entry:
A) there is a known and limited number of potential suppliers that can produce a good in the long run.
B) there is an unlimited number of firms that can produce a good in the long run.
C) the long run market supply curve is vertical at the market quantity.
D) the long run market demand curve is horizontal at the market price.

Question

Quizplus · Accepted Answer

When there is free entry, new firms can easily enter the market and compete with the existing firms. This means that there is no limit to the number of firms that can produce a good in the long run. Therefore, choice B is the best answer. Option A is incorrect because if the number of potential suppliers is limited, then it would be difficult for new firms to enter the market. Option C is incorrect because if the long run market supply curve is vertical, then an increase in demand would not result in a change in price. Option D is incorrect because the long run market demand curve is downward sloping, not horizontal.

With Free Entry