In a contestable market,
A)Entry occurs when prices rise above average total costs.
B)Many firms compete,which drives prices down to minimum long-run average total cost.
C)A few firms use predatory prices to achieve market share.
D)A few firms collude to achieve monopoly profits.

Question

Quizplus · Accepted Answer

In a contestable market, the threat of potential entry forces existing firms to keep prices at a level where they do not exceed average total costs, as any price above this would attract new entrants.

In a Contestable Market