The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Entry and Market Structure

  • B. Curtis Eaton
Reference work entry
DOI: https://doi.org/10.1057/978-1-349-95189-5_516

Abstract

Entry – and its opposite, exit – have long been seen to be the driving forces in the neoclassical theory of competitive markets. Long-run equilibrium in such a market requires that no potential entrant finds entry profitable, and that no established firm finds exit profitable. In conjunction with the price-taking assumption, the first condition requires that price be no greater than minimum average cost, AC , and the second that price be no less than AC . Hence, in equilibrium, price is equal to AC . There is very little more to the theory of equilibrium in a competitive market than this simple yet powerful story of no-entry and no-exit.

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Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • B. Curtis Eaton
    • 1
  1. 1.