Economics
Quizzes & Activities
Contestable Markets (Revision Quizlet Activity)
- Level:
- A Level, IB
- Board:
- AQA, Edexcel, OCR, IB, Eduqas, WJEC
Last updated 4 Jan 2022
Here are sixteen key terms relating to contestable markets. Check and test your understanding using this Quizlet revision activity!
Key Terms: Contestable Markets
Sunk cost: A cost that has been committed and cannot be recovered if a firm leaves a market
Brand loyalty: Consistent preference for one brand over others
First mover advantage: Gains from being early into an industry and achieving economies of scale
Allocative efficiency: Achieved in a contestable market if existing firms price at marginal cost
X-efficiency: When strong actual and potential competition increases incentives for firms to reduce unit costs
Patent: A legal barrier to contestability that allows a firm to protect intellectual property for some years
Perfectly contestable market: A industry in which entry and exit are costless
Creative destruction: The upheaval of the established order in the pursuit of innovation
Process innovation: Change in the way a product or service is conceived, manufactured or distributed
Product innovation: Small, subtle changes to the characteristics and performance of a good or a service
Hit and run entry: Where new firms join an industry to cream off some supernormal profits of incumbents and then exit
Challenger brand: A rival product seeking to disrupt sales of established products by being innovative or using a different business model
Platform business: A business model that creates value by facilitating exchanges between two or more consumers and producers
Switching costs: Expenses that buyers face if they decide to change suppliers
Asymmetric information advantage: When incumbent businesses know more about their industry than potential entrants
Market liberalisation: Opening up an industry to allow new competitor
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