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When the Gain from a Product-Variety Externality Exceeds the Loss

Question 4

Multiple Choice

When the gain from a product-variety externality exceeds the loss from a business stealing externality in a monopolistically competitive market:


A) market efficiency is likely to be enhanced by the entrance of new firms in the market
B) the market structure is likely to be in transition
C) firms are more likely to operate at efficient scale
D) there are likely to be too many firms in the market

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