Frozen Paws wants to prevent Happy Paws from entering the pet frozen treat market. If Frozen Paws expands its capacity, the expansion can lead to all of the following except which one?
A)increase Frozen Paws' profit- maximizing quantity
B)decrease Frozen Paws' marginal cost
C)increase Frozen Paws' profit- maximizing price
D)decrease Happy Paws' profit from entering the market

Question

Quizplus · Accepted Answer

Expanding capacity can lead to an increase in the profit-maximizing quantity and a decrease in marginal cost due to economies of scale, which in turn can decrease a competitor's profit by making the market less attractive to enter. However, increasing capacity typically leads to a decrease in the profit-maximizing price due to the lower marginal cost and increased supply, not an increase.

Frozen Paws Wants to Prevent Happy Paws from Entering the Pet