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Answer :
According to the theory of contestable markets, the price charged for facial tissues will be roughly equal to the cost of producing a box of facial tissue.
In the field of economics, the term "contestable" refers to a business's vulnerability to challenge or competition from aspiring competitors. In other words, a contestable market is one where businesses have little sunk costs and can enter and exit at will. Low-cost airlines, internet service providers, gas and electricity suppliers, etc. are a few examples of markets that are very competitive. No market is completely contestable in reality since there are always some sunk costs.
Markets that are competitive drive businesses to cut expenses, boosting both allocative and productive efficiency. Economies of scale: Since it is easy to enter and depart a market, a contestable market doesn't necessarily need a huge number of businesses to force costs down.
The given question is incomplete, the complete question is:
9. Suppose there are no barriers to entry in the market for facial tissue, where two brands dominate the industry. According to the theory of contestable markets, the price charged for facial tissue will be:
1. far below the cost of producing a box of facial tissue.
2. far above the cost of producing a box of facial tissue.
3. roughly equal to the cost of producing a box of facial tissue.
4. much higher for the number-one-selling brand than it is for the number-two-selling brand.
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