Carla's Crop Dusting Service charges competitive prices even though it has no competition.This is most likely because:
A) There are no economies of scale in the industry.
B) It operates in a contestable market.
C) It is a natural monopoly.
D) It exercises predatory pricing.

Question

Quizplus · Accepted Answer

The fact that Carla's Crop Dusting Service charges competitive prices even though it has no competition suggests that it operates in a contestable market. In such a market, new competitors can easily enter the market and offer similar services, which creates a competitive pressure to keep prices low. Therefore, even though there are currently no competitors, the threat of potential competition forces the company to keep its prices competitive.

Carla's Crop Dusting Service Charges Competitive Prices Even Though It