Explain what a "perfectly contestable" market means. Give an example of a perfectly contestable market. Explain why the outcome in a perfectly contestable market is that firms produce efficiently
What will be an ideal response?
A perfectly contestable market is a market in which entry and exit are costless. An example of a perfectly contestable market is the market for trucking services. The firms are forced to behave efficiently because of the threat of competition.
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Benny, Denny, Jenny, Kenny, and Lenny are tap-dancing siblings who perform as the Tapiocas
Do to their individual dance styles, Benny and Denny each have a 50% chance of developing hammer toe, and Jenny, Kenny and Lenny each have a 20% chance of developing hammer toe. Each visit to the podiatrist costs $250. If each member of the Tapiocas were offered hammer toe insurance, how much would the premium be?
Suppose the government imposes a 20-cent tax on the sellers of artificially-sweetened beverages. The tax would shift
a. demand, raising both the equilibrium price and quantity in the market for artificially-sweetened beverages. b. demand, lowering the equilibrium price and raising the equilibrium quantity in the market for artificially-sweetened beverages. c. supply, raising the equilibrium price and lowering the equilibrium quantity in the market for artificially-sweetened beverages. d. supply, lowering the equilibrium price and raising the equilibrium quantity in the market for artificially-sweetened beverages.
The sum of public spending on goods and services and transfer payments during a given period cannot exceed tax revenues plus borrowed funds. This is the statement for
A) ad valorem taxation. B) an excise tax. C) a sales tax. D) the government budget constraint.
Is it possible for a firm to have an absolute advantage in producing something without having a comparative advantage? Why or why not?
What will be an ideal response?