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Choosing a utility industry such as telecommunications or water industry, explain the factors, which may affect the contestability of the market.
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SECTION B - ECONOMICS QUESTION (a) Choosing a utility industry such as telecommunications or water industry, explain the factors, which may affect the contestability of the market. A contestable market is a market where an inefficient firm or firms, which is earning excess profits, is likely to be driven out by more efficient or less profitable rival. A market can be contestable even if a single firm, which appears to enjoy a monopoly with market power, dominants it and the new entrant exists only as potential competition. The threat posed by the new entrants in the market is taken to be a key reason for the firm's behaviour in the market. There are many factors that can affect the contestability of the market. The number of firms in the market can change the contestability of the market. If there are many firms in a market the market is known to be contestable. As...
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