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

question 246

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)the market structure is likely to be in transition.

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Definitions:

Future Time

A point in time that has not yet happened or a period that is to come.

Binominal Model

A mathematical model used to price options by considering the possible prices of the underlying asset at expiration.

Strike Price

Strike price is the fixed price at which the holder of an options contract can buy (in case of a call option) or sell (in case of a put option) the underlying asset.

Risk-Free Rate

The rate of return on an investment with zero risk, typically represented by the yield on government securities like U.S. Treasury bonds.