Limit Pricing in a Contestable Market Sets the Price at the Highest

question 75

Multiple Choice

Limit pricing in a contestable market sets the price at the highest level that .

• A) maximises the profit of the existing firm
• B) inflicts a loss on an entrant
• C) maximises the profit of an entrant
• D) maximises the profit of both the existing firm and the entering firm

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Definitions:

Current Account

A segment of a nation's balance of payments that comprises the balance of trade, net primary income, and net secondary income.

Deficit

The amount by which expenses or costs exceed income or revenues, especially in the context of government budgets.

Surplus

A condition where the quantity supplied of a good exceeds the quantity demanded at the current price.

Inflation

The pace at which average prices for products and services climb, reducing the value of money.