How does contestable markets theory challenge orthodox market structure theory? a. Contestable markets theory emphasizes product...
How does contestable markets theory challenge orthodox market structure theory?
| a. |
Contestable markets theory emphasizes product differentiation; orthodox market structure theory does not. |
|
| b. |
Contestable markets theory argues that firms do not maximize sales; orthodox market structure theory argues that they do. |
|
| c. |
Orthodox market structure theory places much greater weight than contestable markets theory on the number of firms in an industry as a major factor in determining a firm's behavior. |
|
| d. |
Contestable markets theory emphasizes nonprice competition; orthodox market structure theory does not. |
Homework Answers
Option C
Orthodox market structure theory places much greater weight than contestable markets theory on the number of firms in an industry as a major factor in determining a firm's behavior.
The theory of contestable markets is associated with the American economist William Baumol. In essence, a contestable market is one with firms facing zero entry and exit costs. This means there are no barriers to entry and no barriers to exit, such as sunk costs and contractual agreements.
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How does contestable markets theory challenge orthodox market
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