When the potential threat of new entrants serves to moderate prices in highly concentrated industries, this is called
A) monopoly power
B) barriers to entry
C) price discrimination
D) contestable markets
E) nationalization

Question

Quizplus · Accepted Answer

Contestable markets theory suggests that the threat of potential new entrants into a market can lead to more competitive pricing and behavior by existing firms, even in industries that are highly concentrated. This is because the existing firms want to discourage new competitors from entering the market.

When the Potential Threat of New Entrants Serves to Moderate