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Economic Definition of contestable markets. Defined.

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Term contestable markets Definition: Markets that have few barriers such that firms can enter or exit quickly. If prices exceed costs, firms can easily enter. If prices drop below cost, firms can also exit quickly. Even though a market has few firms, if entry and exit are easy, then the market is contestable and can exhibit the characteristics of a competitive market. If there are a few firms in an industry in which entry or exit are difficult, the market is not contestable.

 

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