A contestable market is one in which prices are moderated by the
A) need to build an empire
B) desire to maximize output
C) noncompetitive nature of the market
D) threat of potential entry
E) regulations imposed by government

Question

Quizplus · Accepted Answer

A contestable market is characterized by the threat of potential entry by new competitors, which can help to moderate prices even if the market currently has few or no competitors. This threat ensures that existing firms behave competitively to deter new entrants.

A Contestable Market Is One in Which Prices Are Moderated