Economics (AS & A Level) · Oct / Nov 2024 · Paper 33 · Question 6

In a perfectly contestable market, entries and exits are cost-free. In reality, why is this not the case with some firms in contestable markets?

1. AFirms cannot recover all fixed costs if they cease operations.
2. BFirms in the industry all operate at the equilibrium level of output.
3. CLarge firms do not have to increase capital to grow.
4. DMultinational companies always benefit from economies of scale.

As printed in the paper