In a contestable market with one firm,the existing firm
A)sets its price lower than the monopoly price.
B)sets its price equal to the monopoly price.
C)sets its price above the monopoly price.
D)has no competition.
E)sets its price so that other firms will enter the market.

Question

Quizplus · Accepted Answer

In a contestable market, the threat of potential entry by new competitors forces the existing firm to set its price lower than the monopoly price to deter entry, as setting it at or above the monopoly price would invite competition.

In a Contestable Market with One Firm,the Existing Firm