Tom is the only plumber in town, but because he operates in a contestable market
A) he can earn a long-run economic profit.
B) he is always at risk of being sued.
C) he faces potential competition.
D) price discrimination is impossible.

Question

Quizplus · Accepted Answer

In a contestable market, the threat of potential competition restricts the ability of a monopolist or a single supplier (like Tom) to raise prices or earn excessive profits, because new competitors can easily enter the market if the existing firm becomes too profitable.

Tom Is the Only Plumber in Town, but Because He