The Theory of Contestable Markets Concludes That

question 32

Multiple Choice

The theory of contestable markets concludes that

• A)a small number of firms in an industry is strong evidence that they will perform in a noncompetitive way.
• B)even if the number of sellers in an industry is small, profits can be zero in the industry.
• C)inefficient producers can survive in a contestable market.
• D)a firm in a contestable market will sell at a price above marginal cost.

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Definitions:

Independent Variable

In an experiment or study, the variable that is manipulated to observe its effect on the dependent variable.

Dependent Variable

A variable in an experiment or model that is expected to change in response to changes in another variable, known as the independent variable.

Price

The cost needed to acquire a product or service.

Hart-Celler Act

1965 law that eliminated the national origins quota system for immigration established by laws in 1921 and 1924; led to radical change in the origins of immigrants to the United States, with Asians and Latin Americans outnumbering Europeans.