The contestable markets hypothesis differs from the requirements for perfect competition in that
A)the former requires many competitors and the latter only one … who fears competition.
B)the latter requires many competitors and the former only one … who fears competition.
C)the former doesn't require freedom of entry and the latter does.
D)the latter doesn't require freedom of entry and the former does.

Question

Quizplus · Accepted Answer

The contestable markets hypothesis suggests that a market can be competitive with only one firm if there is free entry and exit, meaning the firm behaves as though it faces competition due to the threat of potential entrants. Perfect competition, on the other hand, requires many competitors actually present in the market.

The Contestable Markets Hypothesis Differs from the Requirements for Perfect