The threat of new firms easily entering a market and taking customers away from an existing firm is characteristic of a:
A) contestable market.
B) nondominant market.
C) Nash market.
D) prisoner's dilemma.

Question

Quizplus · Accepted Answer

A contestable market is one in which the threat of new firms entering the market keeps existing firms competitive. In a contestable market, barriers to entry are low, and there are no significant advantages for incumbent firms, which means that new firms can easily enter the market and take away customers from existing firms. Therefore, the threat of new firms entering the market is characteristic of a contestable market. The other options do not describe a market with the same characteristics.

The Threat of New Firms Easily Entering a Market and Taking