Before summer 2008, if you wanted a cell phone in Bhutan, you only had one choice: B-Mobile, owned and operated by the government. Then, this past spring, a privately owned competitor, Tashi, was let in. What do you predict will happen to equilibrium price and quantity in the cell phone market?
A) Price will decrease and quantity will increase.
B) Price will increase and quantity will decrease.
C) Both price and quantity will increase.
D) Both price and quantity will decrease.

Question

Quizplus · Accepted Answer

With the entry of a new competitor, the market becomes more competitive, leading to a decrease in price and an increase in quantity.

Before Summer 2008, If You Wanted a Cell Phone in Bhutan