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Contestable markets Flashcards | StudBud
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Contestable markets
Contestable markets
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StudBud Administration
#contestable markets
Flashcards
10 cards
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Practice quiz
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Questions
10
Answers
1
Firms in contestable markets tend to have a lower price/higher output than monopolistic firms..
Reducing organisational slack
Promoting allocative efficiency
Promoting dynamic efficiency
Promoting x- efficiency
2
Contestable markets force firms to think very carefully about keeping costs down. This promotes
Allocative efficiency
x-inefficiency
Productive efficiency
Dynamic efficiency
3
Contestable markets are characterised by
Freedom of exit for incumbent firms
Freedom of entry and exit for firms
Freedom of entry for new firms
High barriers to entry and exit
4
Contestable markets
Are perfectly competitive
Are monopolistic
May have very few or very many firms
Are characterised by 'competition amongst the few'
5
Which of the following sectors is most likely to be contestable in the UK today
Hairdressers
Nuclear energy generation
Sports footwear
Pharmaceutical companies
6
A firm in a contestable market, seeking to deter entrants, is most likely to set price
P1
P4
P2
P3
7
Examples of sunk costs include all of the following,
except
Promotional spending
Corporate sponsorship
Non-specialist capital equipment
Training costs
8
Policies to promote contestability include the removal of all of the following,
except
The granting of long-term patents
Licensing regimes for public broadcast TV
Artificial barriers to entry
CMA legislation
9
Firms in contestable markets always produce
Homogenous products
Highly differentiated products
It doesn't matter
Branded goods
10
The potential for 'hit and run' tactics ensures that incumbent firms
Only make a normal profit
Can make long-run abnormal profit
Have no incentive to stay in the market
Set price above unit cost
