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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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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