A contestable market is similar to a perfectly competitive market in that there
A)are barriers to entry.
B)are no barriers to entry.
C)can be only one firm in the market.
D)will be no entry if the existing firm makes an economic profit.
E)is a perfectly elastic demand.

Question

Quizplus · Accepted Answer

A contestable market is a market where there are no significant barriers to entry or exit, making it easy for firms to enter or exit the market based on changes in prices or technology. This leads to the market being similar to a perfectly competitive market where there are many small firms competing with one another, and there are no barriers to entry or exit. Therefore, the correct answer is B, which states that a contestable market has no barriers to entry.

A Contestable Market Is Similar to a Perfectly Competitive Market