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Economics
MEDIUM
ENGLISH
Economics
When firms enter a monopolistically competitive market and the business-stealing externality is larger than the product-variety externality then ?
there are too many firms in the market and market efficiency could be increased if firms exited the market
Correct answer
B
the number of firms in the market is optimal and the market is efficient
Option B
C
There are too few firms in the market and market efficiency could be be increased with additional entry
Option C
D
The only way to improve efficiency in this market is for the government to regulate it like a natural monopoly.
Option D
Correct answer: A
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