If a Contestable Market Has Only One Seller, Which of the Following

question 71

Multiple Choice

If a contestable market has only one seller, which of the following will keep the seller from producing inefficiently and charging a price that generates long-run economic profits?

• A) government regulations
• B) low costs of entry into and exit from the market
• C) substantial economies of scale that provide a competitive advantage to large firms in such markets
• D) the threat of a government takeover of the firms in these markets

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Definitions:

Due Care

The effort made by an ordinarily prudent or reasonable party to avoid harm to another party.

Negligence

The failure to exercise a level of care that a reasonably prudent person would in similar circumstances, leading to unintended harm or damage.

Proximate Cause

A legal term referring to an event sufficiently related to an injury that the law considers the event to be the cause of that injury.

Breached Duty

The failure to fulfill a legal or ethical obligation, often leading to liability.