Assume That There Is Only One Firm Producing Electric Toothbrushes

question 11

Multiple Choice

Assume that there is only one firm producing electric toothbrushes and its firm specific demand curve is the same as the market demand curve.If a second firm that also produces electric toothbrushes enters the market,profit of the first firm decreases because:

• A)the competition between the two firms causes the price to go down.
• B)it produces less electric toothbrushes.
• C)its average cost of production raises due to higher demand.
• D)A and B are correct.