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A contestable market is similar to a perfectly competitive market in that there O A. are barriers to entry. OB. are no barrieThe Competition Act distinguishes between business practices that are criminal and noncriminal. Which of the following is nonA contestable market exists whenever A. potential entry holds down prices. O B. two or more firms are competing. O C. the Her

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Answer #1

1. Answer : (b) no barriers to entry

A contestable market is a place where there is enough competition between market players. In that sense, it is similar to a competitive market where there are multiple companies capitalizing on a particular sector. If there have to be more companies that are competing with each other, there should be no barrier to entry in case of new companies.  

2. Answer : (b) refusal to deal

The Competition Act is a federal act that prevents the anti competitive practices in marketplace. It has both criminal and non-criminal provisions.

In the given options, only refusal to deal can be defined as a non criminal offense. It multiple stakeholders have agreed for a deal and if one of them backs out due to non- profitability, it can be considered as a 'refusal to deal' scenario. Though it is considered as an unlawful act, it is not classified under criminal activity as the law is subjected to vary under jurisdictions and the scenario of decision of refusal.

3. Answer : (a) potential entry holds down prices

A contestable market exists in case when there is multiple companies in the market competing with each other. As a result of competition, the price levels in the market comes down significantly making it beneficial for the consumers. And here, there should be no barriers to entry for new market players and policies of the market should be favorable to all companies irrespective of market capitalization.

In the given options, as said, the contestable markets holds down prices of goods and services as there is much competition.

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