Question

What do free entry and exit refer to?

a.the ability of businesses to hire and fire staff as needed for rising and falling levels of production
b.the ability of businesses to begin or end production and sales according to profitability
c.the entry of mergers and exit of small producers common in perfectly competitive markets
d.the repetitive process of the rise and fall of demand in the marketplace?

Answer 1

The correct answer should be b.the ability of businesses to begin or end production and sales according to profitability

Free entry and exit means that the company is allowed to enter a market that it wants and can at any point in time leave it if it sees that it's unprofitable. There can be no hindrances in its entry if it has the money to initiate production.