CCEA · A2 1 · Business Economics

Contestable markets

Hit-and-run entry, sunk costs and incumbent discipline.

2 hours · short answer, data response and one essay · 90 marksEconomics AO1–AO410 practice questions

Specification coverage

What you need to know

Conditions for contestability
Entry and exit
Sunk costs
Incumbent response
Policy implications

01Model

Build the economic model

A concentrated market can behave competitively when entry is credible, rapid and reversible with low sunk costs. Potential competition can discipline price and efficiency.

For contestable markets, state the relationship between contestable market and the relevant agents, then identify the ceteris-paribus conditions. The model is a disciplined simplification, not a complete description of reality.

Define the central variables precisely.
Identify the agents making decisions.
State what is held constant and why that matters.

02Evidence

Apply evidence and data

A route market has two incumbents but leasing makes aircraft capacity available to a potential entrant.

Application in contestable markets means using scale, direction, timing and source to alter the argument. Explain how the evidence changes the mechanism instead of merely naming the context or copying a figure.

Check units, dates and whether values are nominal or real.
Separate correlation from a supported causal inference.
Identify winners, losers and the appropriate counterfactual.

03Analyse

Develop the mechanism

Lower sunk barriers → threat of entry rises → incumbent limits price or improves efficiency → supernormal profit and consumer outcomes change.

Carry this contestable markets chain far enough to answer the question: identify the agent's response, the resulting market or macroeconomic change and why the outcome matters.

Explain each arrow in the chain.
Use the diagram or calculation in the written analysis.
Distinguish short-run adjustment from longer-run response.

04Evaluate

Evaluate assumptions and magnitude

Brand loyalty, slots, network effects, predatory response and imperfect information can make formal entry possible but not credible.

Evaluation of contestable markets should change confidence in the result. Test elasticity, time lags, scale, incentives, distribution and unintended effects rather than adding a generic “however”.

Which assumption is most fragile?
Would a different elasticity reverse or only weaken the result?
What evidence could change the judgement?

05Judge

Reach an informed judgement

For contestable markets, choose the argument with the greatest contextual importance and explain why it outweighs the alternative. State the conditions under which it holds rather than repeating the introduction.

The opportunity cost and distributional effect of contestable market matter. Political preferences may affect objectives, but the exam judgement must rest on transparent assumptions and evidence rather than ideology.

Answer the exact command and scope.
Rank the decisive factors.
State a condition, timeframe and possible reason to revise the conclusion.

From theory to a testable claim

A concentrated market can behave competitively when entry is credible, rapid and reversible with low sunk costs. Potential competition can discipline price and efficiency.

Applied task

A route market has two incumbents but leasing makes aircraft capacity available to a potential entrant.

Causal chain

Lower sunk barriers → threat of entry rises → incumbent limits price or improves efficiency → supernormal profit and consumer outcomes change.

Applied task

Rewrite the contestable markets chain with one piece of numerical or contextual evidence at the link where it changes the expected magnitude.

Evaluation that does work

Brand loyalty, slots, network effects, predatory response and imperfect information can make formal entry possible but not credible.

Applied task

Explain whether this consideration weakens, delays, redistributes or reverses the predicted contestable markets outcome.

Teach it from first principles

Understand the mechanism, then apply it

Each lesson moves from the underlying idea to a contextual decision, its limits and the assessment objectives.

01Core lesson

Potential competition and hit-and-run entry

Contestability depends on the credibility of entry and exit, especially sunk cost, rather than the observed number of firms. Potential rivals can constrain incumbent conduct.

Build the idea

Entry must be legally and practically possible, with access to technology, inputs and customers.
Exit must allow recovery of most avoidable capital; otherwise entry is risky.
An entrant may capture short-lived profit and leave before incumbents retaliate.
Incumbents anticipating entry may limit price, improve quality or reduce X-inefficiency.

Cause-and-effect mechanism

Sunk barriers fall
expected post-entry profit becomes credible
incumbent anticipates hit-and-run entry
price or cost performance improves
realised entry may never occur because the threat disciplines behaviour

When this may not apply

Incumbents may retaliate before exit is possible.
Brand loyalty and network effects make customers costly to acquire.
Predatory or limit pricing is hard to distinguish from efficient low pricing.

How this could appear in the exam

Commands: Explain, Analyse, Evaluate

AO1: Define the ideas used in potential competition and hit-and-run entry accurately and select only the relevant model.

AO2: Use the case figures, dates and institutional details at the point where they change the argument.

AO3: Explain every behavioural response and market link; do not jump from the first change to the final outcome.

AO4: Test the strongest assumption, compare effects on agents and finish with a conditional, evidence-led judgement.

02Core lesson

Contestability versus concentration

A concentrated market may perform competitively if entry is credible; a fragmented market may still perform poorly if local switching and information are weak.

Build the idea

Structure, conduct and performance are related but not identical.
A high CR4 measures current shares, while contestability asks how securely those shares are protected.
Regulators can target switching, interoperability or access rather than mechanically breaking firms up.
Dynamic investment can require recoverable returns, so zero profit is not the policy goal.

Cause-and-effect mechanism

Measure concentration
identify technological, legal and strategic entry/exit conditions
assess expected incumbent response and entrant scale
compare consumer outcomes and innovation
choose a remedy proportionate to the actual barrier

When this may not apply

Entry on paper is not credible if customer acquisition is prohibitively costly.
Frequent entry can coexist with weak scale and poor quality.
Contestability does not guarantee distributional fairness or environmental performance.

How this could appear in the exam

Commands: Explain, Analyse, Evaluate

AO1: Define the ideas used in contestability versus concentration accurately and select only the relevant model.

AO2: Use the case figures, dates and institutional details at the point where they change the argument.

AO3: Explain every behavioural response and market link; do not jump from the first change to the final outcome.

AO4: Test the strongest assumption, compare effects on agents and finish with a conditional, evidence-led judgement.

Key-term workshop

Know the term. Use the term.

A definition earns limited credit on its own. Open each term to connect it to context, nearby concepts and exam reasoning.

Contestable marketMarket where credible entry and exit constrain incumbents.

In plain English

Use contestable market to identify the exact relationship or condition being analysed; it is not a general label for any economic change.

Context

A route market has two incumbents but leasing makes aircraft capacity available to a potential entrant. In this setting, contestable market matters only where it changes an agent's incentive, constraint or likely response.

Do not confuse it with…

Contestable market means: Market where credible entry and exit constrain incumbents. It should not be confused with hit-and-run entry, which means: Temporary entry to capture profit before exiting.

Use it in the exam

Define contestable market precisely, link it to evidence, then explain the transmission mechanism and the condition under which the predicted effect may differ.

Hit-and-run entryTemporary entry to capture profit before exiting.

In plain English

Use hit-and-run entry to identify the exact relationship or condition being analysed; it is not a general label for any economic change.

Context

A route market has two incumbents but leasing makes aircraft capacity available to a potential entrant. In this setting, hit-and-run entry matters only where it changes an agent's incentive, constraint or likely response.

Do not confuse it with…

Hit-and-run entry means: Temporary entry to capture profit before exiting. It should not be confused with sunk cost, which means: Cost unrecoverable on exit.

Use it in the exam

Define hit-and-run entry precisely, link it to evidence, then explain the transmission mechanism and the condition under which the predicted effect may differ.

Sunk costCost unrecoverable on exit.

In plain English

Use sunk cost to identify the exact relationship or condition being analysed; it is not a general label for any economic change.

Context

A route market has two incumbents but leasing makes aircraft capacity available to a potential entrant. In this setting, sunk cost matters only where it changes an agent's incentive, constraint or likely response.

Do not confuse it with…

Sunk cost means: Cost unrecoverable on exit. It should not be confused with limit pricing, which means: Keeping price low enough to deter entry.

Use it in the exam

Define sunk cost precisely, link it to evidence, then explain the transmission mechanism and the condition under which the predicted effect may differ.

Limit pricingKeeping price low enough to deter entry.

In plain English

Use limit pricing to identify the exact relationship or condition being analysed; it is not a general label for any economic change.

Context

A route market has two incumbents but leasing makes aircraft capacity available to a potential entrant. In this setting, limit pricing matters only where it changes an agent's incentive, constraint or likely response.

Do not confuse it with…

Limit pricing means: Keeping price low enough to deter entry. It should not be confused with contestable market, which means: Market where credible entry and exit constrain incumbents.

Use it in the exam

Define limit pricing precisely, link it to evidence, then explain the transmission mechanism and the condition under which the predicted effect may differ.

ContestabilityThe degree to which credible entry and exit constrain incumbent firms.

In plain English

How exposed incumbents are to potential competition.

Context

Leasable aircraft and open airport slots make route entry more credible.

Do not confuse it with…

It differs from concentration, which describes existing market shares.

Use it in the exam

Use contestability precisely, attach it to the evidence and explain what it changes. A definition without application earns limited credit.

Potential competitionCompetitive pressure from firms that could enter even if they have not yet done so.

In plain English

The threat changes incumbent decisions.

Context

A foreign platform can enter rapidly if interoperability rules allow it.

Do not confuse it with…

It is not observed rivalry among existing firms.

Use it in the exam

Use potential competition precisely, attach it to the evidence and explain what it changes. A definition without application earns limited credit.

Worked reasoning

Follow the thinking, not just the answer

Move from model and evidence to mechanism, evaluation and judgement.

Build the economic chain step by step

Starting point: A route market has two incumbents but leasing makes aircraft capacity available to a potential entrant.

ModelA concentrated market can behave competitively when entry is credible, rapid and reversible with low sunk costs. Potential competition can discipline price and efficiency.
EvidenceSelect the figure, fact or institutional detail that changes the expected direction, size or timing of the response.
MechanismLower sunk barriers → threat of entry rises → incumbent limits price or improves efficiency → supernormal profit and consumer outcomes change.
Quantitative checkCheck the units, time period, direction and scale of every figure before using it as evidence.
EvaluationBrand loyalty, slots, network effects, predatory response and imperfect information can make formal entry possible but not credible.

Result: Conclude by ranking the decisive condition and stating what additional evidence would increase or reduce confidence in the prediction.

Separate what the evidence shows from what it cannot prove

Starting point: Suppose the predicted outcome appears after the change described in the case.

ObserveDescribe the direction, size, units and dates without adding a causal claim.
ExplainLower sunk barriers → threat of entry rises → incumbent limits price or improves efficiency → supernormal profit and consumer outcomes change.
ChallengeIdentify another variable, reverse-causality possibility or measurement issue that could produce the same pattern.
CompareAsk what would have happened without the change—the relevant counterfactual.
JudgeBrand loyalty, slots, network effects, predatory response and imperfect information can make formal entry possible but not credible.

Result: Sequence and correlation can support an argument, but neither establishes causation without a credible mechanism and counterfactual evidence.

Move from description to economic reasoning
Skill	Stronger economic use	Weaker response
Model	State the relationship and its ceteris-paribus conditions.	Present the model as an unconditional fact.
Evidence	Interpret the units, scale, dates and comparison in this setting: A route market has two incumbents but leasing makes aircraft capacity available to a potential entrant.	Copy a figure and claim it proves contestable market caused the outcome.
Analysis	Explain each behavioural and market link in this chain: Lower sunk barriers → threat of entry rises → incumbent limits price or improves efficiency → supernormal profit and consumer outcomes change.	Jump from the initial change directly to the final outcome.
Evaluation	Show how this condition changes magnitude, timing or distribution: Brand loyalty, slots, network effects, predatory response and imperfect information can make formal entry possible but not credible.	Add a generic disadvantage beginning with ‘however’.
Judgement	Rank the conditions affecting contestable markets and use an explicit counterfactual.	Repeat the introduction or choose a side without weighing it.

Differentiated knowledge check

Recall, apply, analyse and judge

Choose the best answer, then use the explanation to improve your reasoning.

Recall1. Which definition of Contestable market is most accurate?

Recall2. What should a student do first when explaining contestable markets?

Application3. A route market has two incumbents but leasing makes aircraft capacity available to a potential entrant. Which response applies economics most effectively?

Analysis4. Which is the strongest analytical chain for contestable markets?

Reasoning5. Which consideration most seriously limits a certain conclusion about contestable markets?

Reasoning6. What additional evidence would most improve a judgement about contestable markets?

Exam technique

Build a defensible 30-mark judgement

Reasoning, evidence and conditions matter more than length.

Read the command, scope, period and economic agent in the question.
Select only the theory, diagram and evidence that help answer that precise question.
Label every axis, curve, equilibrium and change; explain the diagram in words.
Show formula, substitution, working and units, then interpret the result.
Develop each cause-and-effect chain rather than listing consequences.
Evaluate throughout using assumptions, magnitude, elasticity, time lags, evidence and distribution.
Compare the relative importance of competing arguments.
For 30 marks, finish with a conditional judgement identifying the decisive factor and what could change it.

Extended answer deconstruction

Evaluate the view that the main mechanism in this topic will necessarily produce the predicted outcome. [30]

A route market has two incumbents but leasing makes aircraft capacity available to a potential entrant.

Weak fragment

The theory says the outcome will happen. There are advantages and disadvantages. Overall, it is likely to work.

Mid-range response

The mechanism suggests an effect because lower sunk barriers → threat of entry rises → incumbent limits price or improves efficiency → supernormal profit and consumer outcomes change. The supplied context is relevant, but the conclusion depends on the size of the response and the time period.

Strong response

The model gives a credible direction of effect, but not a certain magnitude or welfare conclusion. The decisive issue is whether the behavioural response and constraint described in the evidence are strong enough within the relevant period. Brand loyalty, slots, network effects, predatory response and imperfect information can make formal entry possible but not credible. The most defensible judgement is therefore conditional on measured response, distribution and the counterfactual rather than the policy or market change alone.

The weak fragment asserts and lists; it does not apply evidence or establish a causal chain.
The mid response uses the mechanism and begins to test magnitude, but needs a clearer comparison and evidence.
The high response evaluates assumptions throughout and makes an evidence-dependent judgement.
A long descriptive answer can score below a shorter response that accurately uses evidence, analysis and evaluation.

Common traps

Describing a diagram without explaining why a curve moves.
Using a statistic without interpreting its economic significance.
Presenting a list of policies or pros and cons instead of a developed comparison.

Morrow+ advanced practice

10 original questions for Contestable markets

Core teaching and the quiz above remain free. Morrow+ unlocks this topic's data-response bank, extended response, formative AO feedback and retry history.

Morrow estimated marks are formative revision feedback, not official CCEA marks. AI can be inaccurate.

Unlock advanced practice

Connections

See the topic as part of the course

Contestable market changes the incentives or constraints facing economic agents; their response drives the mechanism rather than the label alone.
Elasticity can determine the size of the contestable markets response even where the question does not name elasticity.
Opportunity cost and distribution matter in contestable markets because an aggregate gain can coexist with significant losses for particular groups.
Evidence quality links contestable markets to every unit: distinguish nominal from real values, correlation from causation and an observed outcome from its counterfactual.

Active recap

Can you do these without notes?

Define Contestable market and distinguish it from Hit-and-run entry.
Rebuild this mechanism without notes: Lower sunk barriers → threat of entry rises → incumbent limits price or improves efficiency → supernormal profit and consumer outcomes change.
Name the diagram or calculation that would add useful evidence—and explain why it is relevant.
Explain how this evaluation changes the conclusion: Brand loyalty, slots, network effects, predatory response and imperfect information can make formal entry possible but not credible.
Identify one claim the evidence can support and one claim it cannot establish by itself.

Loading Morrow

Getting this page ready…

Please wait a moment. Your account data has not been changed.

← A Level Economics

CCEA · A2 1 · Business Economics

Contestable markets

Hit-and-run entry, sunk costs and incumbent discipline.

2 hours · short answer, data response and one essay · 90 marksEconomics AO1–AO410 practice questions

Specification coverage

What you need to know

Conditions for contestability
Entry and exit
Sunk costs
Incumbent response
Policy implications

01Model

Build the economic model

A concentrated market can behave competitively when entry is credible, rapid and reversible with low sunk costs. Potential competition can discipline price and efficiency.

Define the central variables precisely.
Identify the agents making decisions.
State what is held constant and why that matters.

02Evidence

Apply evidence and data

A route market has two incumbents but leasing makes aircraft capacity available to a potential entrant.

Check units, dates and whether values are nominal or real.
Separate correlation from a supported causal inference.
Identify winners, losers and the appropriate counterfactual.

03Analyse

Develop the mechanism

Lower sunk barriers → threat of entry rises → incumbent limits price or improves efficiency → supernormal profit and consumer outcomes change.

Carry this contestable markets chain far enough to answer the question: identify the agent's response, the resulting market or macroeconomic change and why the outcome matters.

Explain each arrow in the chain.
Use the diagram or calculation in the written analysis.
Distinguish short-run adjustment from longer-run response.

04Evaluate

Evaluate assumptions and magnitude

Brand loyalty, slots, network effects, predatory response and imperfect information can make formal entry possible but not credible.

Which assumption is most fragile?
Would a different elasticity reverse or only weaken the result?
What evidence could change the judgement?

05Judge

Reach an informed judgement

Answer the exact command and scope.
Rank the decisive factors.
State a condition, timeframe and possible reason to revise the conclusion.

From theory to a testable claim

A concentrated market can behave competitively when entry is credible, rapid and reversible with low sunk costs. Potential competition can discipline price and efficiency.

Applied task

A route market has two incumbents but leasing makes aircraft capacity available to a potential entrant.

Causal chain

Lower sunk barriers → threat of entry rises → incumbent limits price or improves efficiency → supernormal profit and consumer outcomes change.

Applied task

Rewrite the contestable markets chain with one piece of numerical or contextual evidence at the link where it changes the expected magnitude.

Evaluation that does work

Brand loyalty, slots, network effects, predatory response and imperfect information can make formal entry possible but not credible.

Applied task

Explain whether this consideration weakens, delays, redistributes or reverses the predicted contestable markets outcome.

Teach it from first principles

Understand the mechanism, then apply it

Each lesson moves from the underlying idea to a contextual decision, its limits and the assessment objectives.

01Core lesson

Potential competition and hit-and-run entry

Contestability depends on the credibility of entry and exit, especially sunk cost, rather than the observed number of firms. Potential rivals can constrain incumbent conduct.

Build the idea

Entry must be legally and practically possible, with access to technology, inputs and customers.
Exit must allow recovery of most avoidable capital; otherwise entry is risky.
An entrant may capture short-lived profit and leave before incumbents retaliate.
Incumbents anticipating entry may limit price, improve quality or reduce X-inefficiency.

Cause-and-effect mechanism

Sunk barriers fall
expected post-entry profit becomes credible
incumbent anticipates hit-and-run entry
price or cost performance improves
realised entry may never occur because the threat disciplines behaviour

When this may not apply

Incumbents may retaliate before exit is possible.
Brand loyalty and network effects make customers costly to acquire.
Predatory or limit pricing is hard to distinguish from efficient low pricing.

How this could appear in the exam

Commands: Explain, Analyse, Evaluate

AO1: Define the ideas used in potential competition and hit-and-run entry accurately and select only the relevant model.

AO2: Use the case figures, dates and institutional details at the point where they change the argument.

AO3: Explain every behavioural response and market link; do not jump from the first change to the final outcome.

AO4: Test the strongest assumption, compare effects on agents and finish with a conditional, evidence-led judgement.

02Core lesson

Contestability versus concentration

A concentrated market may perform competitively if entry is credible; a fragmented market may still perform poorly if local switching and information are weak.

Build the idea

Structure, conduct and performance are related but not identical.
A high CR4 measures current shares, while contestability asks how securely those shares are protected.
Regulators can target switching, interoperability or access rather than mechanically breaking firms up.
Dynamic investment can require recoverable returns, so zero profit is not the policy goal.

Cause-and-effect mechanism

Measure concentration
identify technological, legal and strategic entry/exit conditions
assess expected incumbent response and entrant scale
compare consumer outcomes and innovation
choose a remedy proportionate to the actual barrier

When this may not apply

Entry on paper is not credible if customer acquisition is prohibitively costly.
Frequent entry can coexist with weak scale and poor quality.
Contestability does not guarantee distributional fairness or environmental performance.

How this could appear in the exam

Commands: Explain, Analyse, Evaluate

AO1: Define the ideas used in contestability versus concentration accurately and select only the relevant model.

AO2: Use the case figures, dates and institutional details at the point where they change the argument.

AO3: Explain every behavioural response and market link; do not jump from the first change to the final outcome.

Leasable aircraft and open airport slots make route entry more credible.

Do not confuse it with…

It differs from concentration, which describes existing market shares.

Use it in the exam

Use contestability precisely, attach it to the evidence and explain what it changes. A definition without application earns limited credit.

Potential competitionCompetitive pressure from firms that could enter even if they have not yet done so.

In plain English

The threat changes incumbent decisions.

Context

A foreign platform can enter rapidly if interoperability rules allow it.

Do not confuse it with…

It is not observed rivalry among existing firms.

Use it in the exam

Use potential competition precisely, attach it to the evidence and explain what it changes. A definition without application earns limited credit.

Worked reasoning

Follow the thinking, not just the answer

Move from model and evidence to mechanism, evaluation and judgement.

Build the economic chain step by step

Starting point: A route market has two incumbents but leasing makes aircraft capacity available to a potential entrant.

ModelA concentrated market can behave competitively when entry is credible, rapid and reversible with low sunk costs. Potential competition can discipline price and efficiency.
EvidenceSelect the figure, fact or institutional detail that changes the expected direction, size or timing of the response.
MechanismLower sunk barriers → threat of entry rises → incumbent limits price or improves efficiency → supernormal profit and consumer outcomes change.
Quantitative checkCheck the units, time period, direction and scale of every figure before using it as evidence.
EvaluationBrand loyalty, slots, network effects, predatory response and imperfect information can make formal entry possible but not credible.

Result: Conclude by ranking the decisive condition and stating what additional evidence would increase or reduce confidence in the prediction.

Separate what the evidence shows from what it cannot prove

Starting point: Suppose the predicted outcome appears after the change described in the case.

ObserveDescribe the direction, size, units and dates without adding a causal claim.
ExplainLower sunk barriers → threat of entry rises → incumbent limits price or improves efficiency → supernormal profit and consumer outcomes change.
ChallengeIdentify another variable, reverse-causality possibility or measurement issue that could produce the same pattern.
CompareAsk what would have happened without the change—the relevant counterfactual.
JudgeBrand loyalty, slots, network effects, predatory response and imperfect information can make formal entry possible but not credible.

Result: Sequence and correlation can support an argument, but neither establishes causation without a credible mechanism and counterfactual evidence.

Move from description to economic reasoning
Skill	Stronger economic use	Weaker response
Model	State the relationship and its ceteris-paribus conditions.	Present the model as an unconditional fact.
Evidence	Interpret the units, scale, dates and comparison in this setting: A route market has two incumbents but leasing makes aircraft capacity available to a potential entrant.	Copy a figure and claim it proves contestable market caused the outcome.
Analysis	Explain each behavioural and market link in this chain: Lower sunk barriers → threat of entry rises → incumbent limits price or improves efficiency → supernormal profit and consumer outcomes change.	Jump from the initial change directly to the final outcome.
Evaluation	Show how this condition changes magnitude, timing or distribution: Brand loyalty, slots, network effects, predatory response and imperfect information can make formal entry possible but not credible.	Add a generic disadvantage beginning with ‘however’.
Judgement	Rank the conditions affecting contestable markets and use an explicit counterfactual.	Repeat the introduction or choose a side without weighing it.

Differentiated knowledge check

Recall, apply, analyse and judge

Choose the best answer, then use the explanation to improve your reasoning.

Recall1. Which definition of Contestable market is most accurate?

Recall2. What should a student do first when explaining contestable markets?

Application3. A route market has two incumbents but leasing makes aircraft capacity available to a potential entrant. Which response applies economics most effectively?

Analysis4. Which is the strongest analytical chain for contestable markets?

Reasoning5. Which consideration most seriously limits a certain conclusion about contestable markets?

Reasoning6. What additional evidence would most improve a judgement about contestable markets?

Exam technique

Build a defensible 30-mark judgement

Reasoning, evidence and conditions matter more than length.

Read the command, scope, period and economic agent in the question.
Select only the theory, diagram and evidence that help answer that precise question.
Label every axis, curve, equilibrium and change; explain the diagram in words.
Show formula, substitution, working and units, then interpret the result.
Develop each cause-and-effect chain rather than listing consequences.
Evaluate throughout using assumptions, magnitude, elasticity, time lags, evidence and distribution.
Compare the relative importance of competing arguments.
For 30 marks, finish with a conditional judgement identifying the decisive factor and what could change it.

Extended answer deconstruction

Evaluate the view that the main mechanism in this topic will necessarily produce the predicted outcome. [30]

A route market has two incumbents but leasing makes aircraft capacity available to a potential entrant.

Weak fragment

The theory says the outcome will happen. There are advantages and disadvantages. Overall, it is likely to work.

Mid-range response

Strong response

The weak fragment asserts and lists; it does not apply evidence or establish a causal chain.
The mid response uses the mechanism and begins to test magnitude, but needs a clearer comparison and evidence.
The high response evaluates assumptions throughout and makes an evidence-dependent judgement.
A long descriptive answer can score below a shorter response that accurately uses evidence, analysis and evaluation.

Common traps

Describing a diagram without explaining why a curve moves.
Using a statistic without interpreting its economic significance.
Presenting a list of policies or pros and cons instead of a developed comparison.

Morrow+ advanced practice

10 original questions for Contestable markets

Core teaching and the quiz above remain free. Morrow+ unlocks this topic's data-response bank, extended response, formative AO feedback and retry history.

Morrow estimated marks are formative revision feedback, not official CCEA marks. AI can be inaccurate.

Unlock advanced practice

Connections

See the topic as part of the course

Contestable market changes the incentives or constraints facing economic agents; their response drives the mechanism rather than the label alone.
Elasticity can determine the size of the contestable markets response even where the question does not name elasticity.
Opportunity cost and distribution matter in contestable markets because an aggregate gain can coexist with significant losses for particular groups.
Evidence quality links contestable markets to every unit: distinguish nominal from real values, correlation from causation and an observed outcome from its counterfactual.

Active recap

Can you do these without notes?

Define Contestable market and distinguish it from Hit-and-run entry.
Rebuild this mechanism without notes: Lower sunk barriers → threat of entry rises → incumbent limits price or improves efficiency → supernormal profit and consumer outcomes change.
Name the diagram or calculation that would add useful evidence—and explain why it is relevant.
Explain how this evaluation changes the conclusion: Brand loyalty, slots, network effects, predatory response and imperfect information can make formal entry possible but not credible.
Identify one claim the evidence can support and one claim it cannot establish by itself.