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Explain How a Market with No Barriers to Entry or Exit

question 112

Essay

Explain how a market with no barriers to entry or exit results in long-run economic profits equaling zero.


Definitions:

Variable Manufacturing Overhead

Costs that vary in total in direct proportion to changes in the volume of production, such as indirect materials and utility costs directly tied to production.

Raw Materials

The basic materials from which a product is made, prior to any processing or manufacturing.

Price Variance

The difference between the actual price paid for something and its standard or expected price.

Labor Efficiency Variance

The difference between the actual hours worked and the standard hours allowed for the work done, multiplied by the standard labor rate.

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