Scenario 16-2
McDonald's restaurants has recently announced intentions to open a new restaurant in Smalltown, Indiana. Assume that the fast-food restaurant market in Smalltown is characterized by monopolistic competition.
-Refer to Scenario 16-2.As a result of the new McDonald's,existing fast food restaurants in Smalltown are likely to
A) suffer from a product-variety externality.
B) suffer from a business-stealing externality.
C) increase their production to achieve the efficient scale.
D) Both b and c are correct.
Correct Answer:
Verified
Q312: Scenario 16-2
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A)the entry of
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