Contestability

Contestability

12th Grade

12 Qs

quiz-placeholder

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Contestability

Contestability

Assessment

Quiz

Social Studies

12th Grade

Practice Problem

Medium

Created by

Gareth Nichols

Used 13+ times

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12 questions

Show all answers

1.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What is a key requirement for a contestable market to exist?

High barriers to entry
Low barriers to entry and exit
Limited competition
Monopolistic control

2.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

According to the theory of contestable markets, what do firms earn in the long run?

Supernormal profits
Abnormal profits
Normal profits
Losses

3.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

How does contestable market theory differ from neo-classical theory in terms of competition?

Focus on the number of firms
Emphasis on barriers to entry and exit
High entry costs are beneficial
Perfect knowledge is not necessary

4.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What role do sunk costs play in creating barriers to market contestability?

They encourage hit and run competition
They deter new entrants
They reduce the risks for new firms
They have no impact on contestability

5.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What is the relationship between supernormal (abnormal) profits and new entrants in a contestable market?

Supernormal profits attract new entrants

Supernormal profits repel new entrants

Supernormal profits have no impact on entry

Supernormal profits only occur in the long run

6.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Florence started a new business and Max noticed that there are more businesses like hers popping up in recent years. What could be one reason for this increasing contestability of markets?

Higher barriers to entry

Economic downturns

Market monopolisation

Decreased entrepreneurial spirit

7.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

How can de-regulation contribute to increased contestability in markets?

By reducing competition
By imposing stricter entry barriers
By opening up markets to new businesses
By limiting product innovation

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