The Theory of Contestable Markets Falls Apart When

question 26

Multiple Choice

The theory of contestable markets falls apart when

• A) no harsh economic penalty exists for exiting the market because there are no sunk costs
• B) the incumbent firm can react quickly to entry by changing its price
• C) the potential competitor can use a hit-and-run entry strategy

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Definitions:

Weighted-Average Method

A method of costing inventory that allocates the mean cost of available goods for sale to the ending inventory and the cost of goods sold.

Assembly Department

A part of a manufacturing firm where parts are put together to create finished goods.

Work In Process Inventory

Goods partially completed during the manufacturing process, not yet ready for sale.

Units Transferred

The quantity of items moved from one stage of production or location to another within a given period.