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Economics (AS & A Level) · May / June 2021 · Paper 32 · Question 9

9708Different market structures

What is the most likely reason that barriers to entry might lead to x-inefficiency?

  1. AThe firm does not account for any external benefits.
  2. BThe firm has no incentive to cut its costs of production.
  3. CThe firm’s price is set higher than its average costs.
  4. DThe firm’s price is set higher than its marginal costs.

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Correct answer: B. The firm has no incentive to cut its costs of production.

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