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:

MACRS

Modified Accelerated Cost Recovery System, a method of depreciation in the U.S. for tax purposes, allowing faster recovery of investments in certain property through depreciation deductions.

Depreciable Real Property

Real estate eligible for depreciation for tax purposes, meaning its cost can be deducted over a period of time.

Straight-Line Method

A method of calculating the depreciation of an asset that evenly spreads out its cost over its useful life.

Entertainment Expenses

Costs for business-related entertainment that may be partially deductible under certain conditions.