As long as a market is contestable, then even if it has only a few sellers, the
A) threat of new entrants will prevent the prices from rising above the competitive level.
B) producers will be able to charge prices that are high enough to produce long-run economic profits.
C) producers will not face new competition because the barriers to entry are high.
D) market will never be expected to come close to the competitive result.

Question

Quizplus · Accepted Answer

In a contestable market, the threat of potential new entrants keeps prices at a competitive level, as existing firms are deterred from raising prices due to the risk of losing market share to new competitors.

As Long as a Market Is Contestable, Then Even If