When a second firm enters a monopolist's market

Question

Quizplus · Accepted Answer

When a second firm enters a monopolist's market, the monopolist's market power is weakened, which means that the monopolist will have to decrease their price to remain competitive. This will result in the monopolist's profits decreasing. The quantity produced by the first firm may or may not increase depending on the specifics of the market and the actions taken by the firms. Therefore, the only definite outcome is the decrease in profits for the monopolist.

When a Second Firm Enters a Monopolist's Market