Everything else remaining unchanged,if a new seller enters a market to compete with an existing monopoly that is enjoying economies of scale,it will lead to ________.
A) higher profits for both firms
B) higher profits for the existing firm
C) lower profits for the existing firm
D) greater market power for the existing firm

Question

Quizplus · Accepted Answer

When a new seller enters a market to compete with an existing monopoly that is enjoying economies of scale, it will lead to lower profits for the existing firm. This is because the new seller is likely to offer lower prices which will result in a reduction in demand for the existing firm's products. As a result, the existing firm may be forced to lower its prices in order to retain its market share, which will lead to a decrease in its profitability.

Everything Else Remaining Unchanged,if a New Seller Enters a Market