The price in a contestable market is similar to that in a perfectly competitive market because
A) there are no barriers to entry.
B) there are barriers to entry.
C) there are many firms in the market.
D) the firm can earn an economic profit in the long run.

Question

Quizplus · Accepted Answer

In a contestable market, the absence of barriers to entry means that potential competitors can easily enter the market if they see an opportunity for profit, similar to a perfectly competitive market. This threat of potential entry forces existing firms to price their products competitively, often leading to prices that reflect the cost of production, similar to outcomes in perfectly competitive markets.

The Price in a Contestable Market Is Similar to That