In the text, when the Nick Rudd Ice Company starts as a monopoly and then finally faces competition from a new entering ice company, its
A) price falls, its economic profit falls, but its output increases
B) price falls, its economic profit falls, and its ATC falls
C) price falls, its economic profit falls, and it faces a more elastic demand curve
D) price increases, its economic profit falls, and it faces a less elastic demand curve
E) ATC falls, its economic profit falls, and it faces a less elastic demand curve

Question

Quizplus · Accepted Answer

When a monopoly faces competition, its price and economic profit fall due to increased competition. Additionally, the demand curve becomes more elastic because consumers now have more options, making them more responsive to price changes.

In the Text, When the Nick Rudd Ice Company Starts