One of the characteristics of a contestable market is that:
A) all firms have different productive technology.
B) consumers react quickly to a price change.
C) existing firms respond quickly to entry by lowering their price.
D) there are sunk costs.

Question

Quizplus · Accepted Answer

In a contestable market, consumers' quick reaction to price changes ensures that any new entrant can potentially gain market share by offering a lower price, which is a key characteristic of such markets. This responsiveness keeps the market competitive, even if there are few firms or high barriers to entry.

One of the Characteristics of a Contestable Market Is That