The business stealing externality arises because firms post a price above marginal cost and are therefore always eager to sell additional units.

Question

Quizplus · Accepted Answer

When a business posts a price above marginal cost, it creates a business stealing externality by attracting customers away from competitors who may have lower costs and lower prices. This encourages the firm to always be eager to sell additional units.

The Business Stealing Externality Arises Because Firms Post a Price