In the contestable market model, an oligopoly with no barriers to entry sets a:
A) monopoly price.
B) price that significantly exceeds average total cost.
C) price that is equal to average total cost.
D) collusive price.

Question

Quizplus · Accepted Answer

In a contestable market, the threat of potential entry forces firms to set prices equal to average total cost to deter new entrants, ensuring no economic profits are made.

In the Contestable Market Model, an Oligopoly with No Barriers