If a New Entrant (Or an Established Firm) Wants to Leave

question 81

Multiple Choice

If a new entrant (or an established firm) wants to leave a contestable market,

• A) all, or nearly all of, the invested capital values can be recovered.
• B) another firm will always enter to take its place.
• C) it must accept large losses in its capital investment, so it is unlikely to exit.
• D) its leaving will be contested by regulators in the market who seek to prevent exit.

---

Definitions:

Labor Productivity

measures the output produced per unit of labor input, indicating how efficiently labor is used in the production process.

Price Level

A measure of the average prices of goods and services in an economy over a period of time.

Wage Rate

The standard amount of compensation individuals receive in exchange for performing a certain task or job per unit of time.

Monetary Policy

The process by which a central bank, currency board, or equivalent regulatory committee manages the supply of money and interest rates to achieve macroeconomic objectives such as controlling inflation, consumption, growth, and liquidity.