C is the correct answer. A is wrong because even if there are a great no. of industry participants, if one particular company or a couple of companies dominate the industry by having a large market share, the pricing may not be competitive. The companies with a higher market share can rule the pricing. However, if there are low entry barriers, these companies can’t rule the pricing since other firms can enter the industry and reduce their market share, thereby enforcing competitive pricing.
It’s C The question says: “regarding the theory of contestable markets?” A has nothing to do with that, as far as I know
that was a good question. I chose C but I had to think about it.