Scenario 16-5
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 16-5. 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
Q452: The product-variety externality arises in monopolistically competitive
Q453: When existing firms lose customers and profits
Q454: Scenario 16-4
Delish, a moderately priced restaurant, has
Q455: If regulators required firms in monopolistically competitive
Q456: Monopolistic competition is characterized by i)
Efficient scale
Ii)
Markup
Q458: When consumers are exposed to additional choices
Q459: Scenario 16-6
Ike's Ice Cream has decided to
Q460: When the loss from a business-stealing externality
Q461: The typical firm in the US economy
A)has
Q462: Which of the following is not an
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