Article Analysis Critique: Free Entry And Social Inefficiency

Name
Tutor
Course
Date
Article Critique
Article analysis
The article highlighted that most enterprises must incur fixed set-up costs upon entering a market. The numbers of businesses entering a market do not have to be equal to the socially desired number within that market. The article highlighted that within a competitive market that is monopolistic, the free entry could lead to small entry opportunities for the firms which are relative to the social optimum (Mankiw & Whinston 49).
The article provided a simple exposition of the conditions under which entrants within a free entry equilibrium is inefficient, excessive or optimal. The evaluation makes comparisons of how many businesses can enter a market freely against the suitable number that would be socially acceptable, whereby these social conditions cannot control the characteristics of firms once they enter the market (Spence 49).
The analysis indicated that in markets with homogenous products, the existence of imperfect competition and also the business stealing effect would lead to the development of bias against excessive entry. In the process of analyzing the number of firms, when the integer constraint is not considered as well, the marginal entry becomes more desirable toward...