If a contestable market does not satisfy all of the conditions of a perfectly competitive market, that contestable market _______________ achieve resource allocative efficiency.
A)will not
B)will definitely
C)could possibly
D)This is a trick question since only monopolies achieve resource allocative efficiency.

Question

Quizplus · Accepted Answer

Contestable markets, even if not perfectly competitive, can potentially achieve resource allocative efficiency if entry and exit are easy and firms are forced to produce at efficient levels due to the threat of potential competition.

If a Contestable Market Does Not Satisfy All of the Conditions