Question

Which of the following is a characteristic of a contestable market?

		Productive technologies are patent protected.
		Consumers react quickly to a price change.
		Existing firms can respond quickly to entry by lowering their price.
		There are significant sunk costs.

Please help/Explain .

Thank you

Answer 1

ANSWER :: (B) Consumers react quickly to a Price Change

=> Explanation ::

In Contestable Market There Are small Number Of Firms And Firms Can enter Or Exist Freely Without Any Sunk Costs it Is Means No Barriers to entry And No Barriers to Exit. Technology for New Firms Rapidly Available In That Market and It Is Same for All Firms

The Main Characteristic Of Contestable Market Are :

(1) In That Market There Is No Sunk Costs

(2) Existing firms cannot respond quickly to entry by lowering their price.

(3) In That Marker All The Firms Have Same Technology

(4) Consumer React Quickly To A Price Change