For the Theory of Contestable Markets to Work, Four Conditions

question 22

Multiple Choice

For the theory of contestable markets to work, four conditions have to be met: no barriers to market entry, no economies of scale present, consumer willingness to switch between carriers, and

• A) sellers and buyers of such small size that price or supply cannot be influenced.
• B) existing carriers prevented from responding to new entrants' lower prices.
• C) mutual interdependence between various sellers.
• D) no one seller controls a significant portion of the market.

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Definitions:

Securities

Securities that signify ownership in a corporation that's publicly traded (such as shares), a debt obligation to a government entity or a company (through bonds), or entitlements to ownership through options.

Prospectus

A formal document that companies use to describe the securities they are offering for participants and investors.

Registration Process

The sequence of actions taken to officially sign up or enroll in a service, event, or system.

Reserve Requirements

Regulations set by central banks determining the minimum amount of reserves that banks must hold against deposits, influencing liquidity and lending capacities.