A market is contestable if
A)the number of firms is larger than oligopoly.
B)firms spend a lot on advertising.
C)there is free entry and exit.
D)firms have kinked demand curves.

Question

Quizplus · Accepted Answer

A market is contestable if there is free entry and exit, meaning that new firms can enter the market and existing firms can exit the market without facing significant barriers or costs. This potential for competition keeps incumbent firms on their toes, as they can lose market share and profits if they do not remain efficient and customer-oriented. The number of firms and advertising spend are not necessarily indicators of contestability, and kinked demand curves are more characteristic of oligopoly markets.

A Market Is Contestable If