The contestable market theory best applies to
A)pure monopoly.
B)oligopoly.
C)monopolistic competition.
D)perfect competition.

Question

Quizplus · Accepted Answer

The contestable market theory suggests that even in the absence of perfect competition, markets can still approximate it's outcomes if barriers to entry and exit are low. Oligopolies, which in reality display interdependence, are expected to perform closer to the competitive outcome if new firms can enter easily and leave without significant losses. Therefore, the contestable market theory best applies to oligopolies rather than pure monopoly or monopolistic competition where the barriers to entry and exit are high.

The Contestable Market Theory Best Applies to