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- Topic: Quick Eco Question
| Author | Topic: Quick Eco Question |
|---|---|
| bobert @2015-02-28 20:51:34 |
Is monopolistic competition the same as a contestable market? I found the term contestable market in the oligopoly section. If it is a term which only only applies to oligopolies, I am just curious what the difference is. |
| GeorgeC @2015-04-21 14:17:32 |
going on my memory of a-level economics (which is only 5 years old after all...!) I don't think they're the same thing, but similar - contestable markets have very low barriers to entry and exit as per monopolistic competition, but iirc contestable markets don't offer the opportunity to make abnormal profit as the second you charge above your LRAC others will enter the market and push prices down - in a monopolistic competition model you can make abnormal profit in the SR - and technically in the LR too as long as you keep innovating...probably not worth worrying about too much. |
