In a contestable market,
A)Product differentiation results in nonprice competition as well as price competition.
B)There are economies of scale that heighten competition.
C)Barriers to entry and long-run economic profits are low.

Question

Quizplus · Accepted Answer

In a contestable market, there are low barriers to entry and exits, making it easy for new firms to enter and compete with existing firms. This leads to increased competition and no long-run economic profits. Product differentiation may or may not exist in such markets, but it is not a defining characteristic of a contestable market. There may or may not be economies of scale that heighten competition, as this depends on the specific industry and market structure.

In a Contestable Market