According to the theory of contestable markets,monopoly may not be a problem if
A)The structure of a market is competitive.
B)Antitrust regulations are enforced.
C)Firms can exit from the market.
D)Potential competition exists.

Question

Quizplus · Accepted Answer

According to the theory of contestable markets, monopoly may not be a problem if there is potential competition which means that new firms can easily enter the market and compete with the monopolist. In such a market, the threat of competition keeps the monopolist in check and prices remain reasonable. Hence, option D is the best choice.

According to the Theory of Contestable Markets,monopoly May Not Be