In a fully contestable market, a monopoly firm's profits are

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In a fully contestable market, barriers to entry and exit are low, allowing potential competitors to enter the market easily if the monopoly firm tries to set prices above competitive levels. This threat of potential competition forces the monopoly firm to set prices and profits similar to what would be seen in a competitive market, thus limiting its profits to a competitive level.

In a Fully Contestable Market, a Monopoly Firm's Profits Are