When the Loss from a Business-Stealing Externality Exceeds the Gain

question 351

Multiple Choice

When the loss from a business-stealing externality exceeds the gain from a product-variety externality,

• A)firms are more likely to operate at efficient scale.
• B)there are likely to be too many firms in a monopolistically competitive market.
• C)market efficiency is likely to be enhanced by the entry of new firms.
• D)all firms are earning zero economic profit.

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Definitions:

Aging Schedule

A compilation of accounts receivable by the age of each account.

Accounts Receivable

Funds that customers owe to a company for products or services already provided but not yet compensated for.

Credit Extension

The act of a lender increasing the amount of credit available to a borrower or the period over which repayment can be spread.