Free entry and exit of firms occurs within which market
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Free entry and exit occurs within a PERFECTLY COMPETITIVE MARKET.
A perfect market is a market structure where firms are selling homogeneous products, buyers and sellers have perfect information, all firms are price takers, resources i.e. are perfectly mobile and there is free exit and entry of firms.
Although high entry and exit costs are present in many markets, however in perfectly competitive markets firms do not face costs to either enter or exit a market. They have the freedom to enter an industry if there is a potential for profit, or to exit the industry in the case of losses.
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