The theory of contestable markets concludes that a small num

The theory of contestable markets concludes that

a small number of firms in an industry is strong evidence that they will perform in a noncompetitive way.

even if the number of sellers in an industry is small, profits can be zero in the industry.

inefficient producers can survive in a contestable market.

a firm in a contestable market will sell at a price above marginal cost.

all of the above

Solution

Answer is b. Even if the number of sellers in an industry is small, profits can be zero in the industry.

Explanation:

In the contesting market, even the monopoly behaves in a competitive manner due to the fact that there is no barrier for entry of the new firms i.e. any number of firms can enter the industry. This means with the entry of new firm, the profits f the existing firm may slashed down to zero economic profits as the profits get distributed among all the firms in the industry including new entrants.