Later in this chapter, we will see how ease of entry is related to the sustainability of economic profits If entry is easy, then the promise of high economic profits will quickly attract new firms If entry is difficult, it won’t The model of perfect competition assumes easy exit as well as easy entry The assumption of easy exit strengthens the assumption of easy entry Suppose a firm is considering entering a particular market Entry may be easy, but suppose that getting out is difficult For example, suppliers of factors of production to firms in the industry might be happy to accommodate new firms but might require that they sign long-term contracts Such contracts could make leaving the market difficult and costly If that were the case, a firm might be hesitant to enter in the first place Easy exit helps make entry easier Complete Information We assume that all sellers have complete information about prices, technology, and all other knowledge relevant to the operation of the market No one seller has any information about production methods that is not available to all other sellers If one seller had an advantage over other sellers, perhaps special information about a lower-cost production method, then that seller could exert some control over market price—the seller would no longer be a price taker We assume also that buyers know the prices offered by every seller If buyers did not know about prices offered by different firms in the market, then a firm might be able to sell a good or service for a price other than the market price and thus could avoid being a price taker Attributed to Libby Rittenberg and Timothy Tregarthen Saylor URL: http://www.saylor.org/books/ Saylor.org 468