Scenario 16-5 McDonald's Restaurants Has Recently Announced Intentions to Open a New

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.

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