A Single Firm Selling Its Output in a Contestable Market

question 75

Multiple Choice

A single firm selling its output in a contestable market can raise its prices and

• A) insure higher profits.
• B) guarantee monopoly profits.
• C) give other firms the incentive to enter that market.
• D) keep other firms out of the industry with its market power.

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Definitions:

Offer Price

The price at which a seller is willing to sell a security or commodity.

Best Efforts Offering

A best efforts offering is a type of security offering wherein an underwriter commits to sell as much of the offering as possible, but not to purchase the securities outright.

Financial Responsibility

Financial responsibility entails managing finances through prudent budgeting, saving, investing, and making informed financial decisions to ensure stability and growth of personal or business wealth.

Syndicate Sells

Occurs when a group of investment banks work together to sell a large issue of securities to the public or to institutional investors.