A contestable market is a market in which there is no threat of competition for existing firms.

Question

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A contestable market is actually a market in which there is a potential threat of competition for existing firms, even if there are currently no actual competitors present. This potential competition acts as a constraint on the behavior of existing firms as they must always be prepared to defend their market position if a new entrant were to appear.

A Contestable Market Is a Market in Which There Is