Which of the following statements is False ?
Correct answer: D. For a market to be contestable, the product must be produced with a labor-intensive technology
- A. participants in a contestable market are continuously faced with competition or the threat of competition because entry is cheap
- B. In a contestable market, economic profits cannot persist in the long run.
- C. In a contestable market forces will guarantee that the firms produce efficiently or be driven out of business
- D. For a market to be contestable, the product must be produced with a labor-intensive technology
Explanation
Contestability depends on easy entry and exit, often called hit-and-run competition, not on whether production is labour-intensive. The product may be made with either labour-intensive or capital-intensive technology.
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