Fill This Form To Receive Instant Help

Help in Homework
trustpilot ratings
google ratings


Homework answers / question archive / How are the contestable market model and the cartel model of oligopoly related? a) Firms act as perfect competitors in both models

How are the contestable market model and the cartel model of oligopoly related? a) Firms act as perfect competitors in both models

Economics

How are the contestable market model and the cartel model of oligopoly related?

a) Firms act as perfect competitors in both models.

b) Firms earn profits in both models.

c) Firms face barriers to entry in both models.

d) Firms react to other firms when setting their prices in both models.

pur-new-sol

Purchase A New Answer

Custom new solution created by our subject matter experts

GET A QUOTE

Answer Preview

An oligopoly and a contestable market are similar because they both react to other firms when setting their prices. In a contestable market, a company sets their prices based off of the threat of competition. Their prices will adjust because there are no barriers to entry that can harm their competitors ability to decrease their market share. In an oligopoly, firms set their prices based off of the other firms in the market to maximize profits by collusion. Oligopolies profit maximize and contestable market firms revenue maximize based off of the rest of the industry. This means the answer is D.