Contestable Markets (Edexcel A-Level Economics A): Quizzes
📚Quizzes
Practise the questions
10 questions from this quiz
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Practise the questions
10 questions from this quiz
What is a contestable market?
What is a contestable market?
Market where firms earn normal profits
Who developed the theory of contestable markets?
Who developed the theory of contestable markets?
William Baumol
Which condition is most critical for market contestability?
Which condition is most critical for market contestability?
Absence of sunk costs
What is hit-and-run entry?
What is hit-and-run entry?
Entry to take short-run profit then exit
To prevent entry, what price must a monopolist set in a contestable market?
To prevent entry, what price must a monopolist set in a contestable market?
Price equal to average cost
Which type of efficiency is NOT achieved in contestable markets?
Which type of efficiency is NOT achieved in contestable markets?
Allocative efficiency
How has the internet increased market contestability?
How has the internet increased market contestability?
Reduced barriers & improved information
Why are airline markets NOT fully contestable despite aircraft mobility?
Why are airline markets NOT fully contestable despite aircraft mobility?
Passengers don't respond instantaneously
What is limit pricing?
What is limit pricing?
Pricing below profit-max to deter entry
What happens to X-inefficiency in highly contestable markets?
What happens to X-inefficiency in highly contestable markets?
Unlikely to persist