Free entry

Where an opportunity of a profit arises we assume that there will also be firms entering the market for the certain good and compete for it.

The assumption of free entry doesn't mean that a firm is simply able to set up a shop without any costs incurred.

Therefore, even with a free entry to a market the entrant still has to face the same cost structure as does an already existing firm.

Free entry is part of the perfect competition assumption that there are an unlimited number of buyers and sellers in a market.

The entry of such a market depends on the incentives that influence existing businesses and potential new entrants.