In _____ market, the incumbent firm is encouraged to find a price that is profitable yet low enough to deter entry.

Question

Quizplus · Accepted Answer

In a contestable market, the threat of potential entry by new competitors encourages the incumbent firm to set prices competitively to deter entry, while still aiming to make a profit. This is because the market is characterized by low barriers to entry and exit, making it easy for new firms to challenge the incumbent if prices are set too high.

In _____ Market, the Incumbent Firm Is Encouraged to Find