The Basic Idea of the Theory of Contestable Markets Is

question 22

Multiple Choice

The basic idea of the theory of contestable markets is that when the cost of entry and exit is very low, the threat of entry can be sufficient to produce an allocation similar to the one we see under

• A)Monopoly
• B)Monopolistic competition
• C)Perfect competition
• D)Oligopoly

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Definitions:

Income Effect

The change in an individual's or economy's income and how that change will affect the quantity demanded of a good or service.

Real Hourly Wages

The hourly wage of workers adjusted for inflation, representing the purchasing power of the income.

Real Wages

Wages adjusted for inflation, giving a true measure of the purchasing power of earned income over time.

Hourly Wage

The amount of money paid to an employee for every hour worked.