A Single Firm Selling Its Output in a Contestable Market

question 37

Multiple Choice

A single firm selling its output in a contestable market will

• A) establish a monopoly.
• B) be able to maintain high prices indefinitely.
• C) be able to earn high economic profits indefinitely.
• D) be threatened constantly by the entry of new firms.

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Definitions:

Simultaneous Consumption

A consumption pattern in which a product or service is consumed by multiple users at the same time without reducing its availability to others.

Economies of Scale

The financial benefits companies experience from expanding their operation's size, where there's a general trend of decreasing unit costs with the growth in scale.

French Government

The political system of France, characterized by semi-presidential system with a division of powers between the president, the parliament, and the government.

Salt Monopoly

A situation where a single entity controls the supply and pricing of salt, historically seen as a strategic control over a vital commodity.